Monthly roundup - July 2012

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

July 2012 edition
Issued 07 August 2012

In this edition:

• Monthly highlights
• New pronouncements
• Standard setter meetings
• New Deloitte publications
• Other developments

Monthly highlights

Financial reporting implications of Tax Ruling on frankable dividends

The ATO has recently issued a Tax Ruling (TR 2012/05) on frankable dividends which proposes methods by which a company with accumulated losses can pay a final or an interim dividend out of current period profits that is frankable

Since the dividend payment rules in the Corporations Act 2001 was changed from that of ‘profit test’ to ‘three tiered test’ in June 2010, there has been considerable controversy on what could be viewed as ‘dividend’ under the Income Tax Act and whether it would be frankable. This Tax Ruling comments on the ATO’s interpretation of the Corporations Act 2001 with respect to dividend payments and the ability to frank these dividends

As per the Ruling, a dividend can be franked only when it is paid out of ‘profits’ and it suggests methods by which a company with accumulated losses can isolate profits made in one year for payment of frankable dividends in that year or in future years. Some methods suggested by the Ruling are impacted by how profits are disclosed in financial statements, including the ones being prepared for the year ended 30 June 2012. It is therefore important that companies review the Tax Ruling before they issue their financial statements in order to not limit their ability to pay franked dividends

We have issued an alert that provides examples on how the Ruling affects the preparation of financial statements and discusses some interpretational issues that have been identified.

IASB revised work plan: What to expect before December 2012 year end?

The International Accounting Standards Board (IASB) has released a revised work plan that is more definitive in terms of deliverables. Significant pronouncements expected to be released before December 2012 year end include:

• Finalised IFRS: General hedge accounting
• Exposure draft: Impairment, Leases
• Finalised amendments: Consolidation of investment entities

Other major IASB project is 'Revenue recognition' for which a finalised IFRS is expected in the first half of 2013.

Transitional relief and guidance on IFRS 10, IFRS 11, and IFRS 12

The IASB has issued Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) that clarifies the transitional guidance in IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities. The amendments are in response to consistent requests for clarification on certain aspects of the transition guidance in IFRS 10, IFRS 11 and IFRS 12. For further details, refer our IFRS in focus newsletter.

New pronouncements

(A listing of new accounting standards, interpretations, exposure drafts, discussion papers and similar documents issued during the month by the AASB and IASB/IFRIC, along with other IFRS-related documents by other bodies that may be of interest and related links to Deloitte publications and alerts. See also our What’s new in the June 2012 financial reporting cycle summary.)

Australian Accounting Standards Board (AASB)

International Accounting Standards Board (IASB)

*Equivalent pronouncement not yet issued by the AASB

Standard setter meetings

(A listing of meetings of various standard setters during the month or where documents were issued during the month in respect of the previous month’s meetings, with links to our analysis, agenda papers and so on)

New Deloitte publications

(Key IFRS-related and other publications issued by Deloitte during the month, not covered elsewhere. You can find full details and back issues of our various publications by following these links: Accounting alerts, IAS Plus publications, IFRS in Focus Newsletters, Webcasts, and Podcasts)

IFRS publications

• IFRS on Point — IFRS Accounting Developments and Information: June 2012 (PDF 83kb) highlights the month’s important IFRS developments and information
• IASB Project Insights provide a quick overview of the current status of the key projects of the IASB. New updates posted in June 2012 include: Leases (PDF 172kb), Consolidation: Investment entities (PDF 107kb), Financial Instruments: Classification and Measurement (PDF 95kb), Financial Instruments: Impairment (PDF 92kb), and Revenue recognition (PDF 102kb)
• IFRS in Focus — IASB issues amendments to IFRS 10, IFRS 11 and IFRS 12 transition guidance (PDF 74kb): describes amendments that clarify the transition guidance in IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of Interests in Other Entities
• In wake of the euro-zone crisis
  • Exiting the Euro — Financial reporting implications of a country's exit from the Eurozone (PDF 232kb): discusses the broad implication a country may face when exiting the Eurozone
  • Turbulent times — Financial reporting considerations arising from the Eurozone crisis (PDF 545kb): highlights key issues emerging from the ongoing Eurozone crisis that need to be considered by entities preparing their financial statements for periods ending on or after 30 June 2012.

Comment letters

• Deloitte comment letter (PDF 19kb) to the IFRS Interpretation Committee (IFRIC) on its tentative agenda decision: IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IAS 17 Leases – Purchase of right to use land
• Deloitte comment letter (PDF 23kb) to the IFRS Interpretation Committee (IFRIC) on its tentative agenda decision: IAS 19 Employee Benefits — Accounting for contribution-based promises — Impact of the 2011 amendments to IAS 19
• Deloitte comment letter (PDF 22kb) to the IFRS Interpretation Committee (IFRIC) on its tentative agenda decision: IAS 39 Financial Instruments: Recognition and Measurement — Accounting for different aspects of restructuring Greek Government Bonds.

Deloitte Webcasts and podcasts

• Dbriefs webcast: Important IFRS Developments (link to IAS plus): discusses the IASB work plan, the financial instruments project (focusing on impairment and the limited reconsideration of IFRS 9 in relation to classification and measurement), and an update on the leases and revenue recognition projects.

Other developments

(A brief listing of other financial reporting developments during the month. A full summary of all IFRS-related developments can be found in our July historical summary on IAS Plus. You can also subscribe to our Deloitte IAS Plus RSS feed to be kept informed of developments as they happen)

Australian-specific topics

• The Australian Accounting Standards Board (AASB) has published a Staff paper 'Possible Financial Reporting Implications for the Fixed Price Phase of the Carbon Pricing Mechanism for Emitter Entities' (PDF 449kb), that identifies the key financial reporting issues that may arise for emitter entities during the fixed price phase of the carbon pricing mechanism and possible accounting treatments in respect of those issues under current Australian Accounting Standards
• The Australian Taxation Office (ATO) has issued a Tax Ruling (TR 2012/05) on frankable dividends which proposes methods by which a company with accumulated losses can pay a final or an interim dividend out of current period profits that is frankable.

International Accounting Standards Board

• The International Accounting Standards Board (IASB) has released a revised work plan (26 July 2012) updating the expecting timing of various due process steps in its projects (IAS Plus article)
• The Securities and Exchange Commission (SEC) has issued a Final Staff Report 'Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers', which summarises the observations and analyses the staff has learned in the areas covered by the SEC's Work Plan (IAS Plus article), (IAS Plus summary)

External Webcasts and podcasts

• IASB webcast on projects (link to IASB site)
  • Lease project
  • Financial Instruments

• Podcast summary of meetings (link to IASB site)
  • IASB meeting (16 – 20 July)
  • IFRIC meeting (10 July)

Other global news

• The European Securities and Markets Authority (ESMA) has published a review of the accounting for Greek Government Bonds (GGB) in Europe (IAS Plus article)
• The United Nations Environment Programme Finance Initiative (UNEP-FI), the International Institute for Sustainable Development (IISD) and the Blended Capital Group have issued a joint report that recommends a global integrated reporting standard (IAS Plus article)
• The International Valuation Standards Council (IVSC) has formally launched a new project designed to provide greater valuation guidance to the mining, oil and gas industries (IAS Plus article).

Related links

• Monthly roundup archive
• Assurance & Advisory QuickLinks
• Assurance and advisory services
• IAS Plus website