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Monthly roundup - July 2012

Staying on top of developments

Author: Deepesh Malik and Debbie Hankey, Accounting Technical Group

July 2012 edition
Issued 07 August 2012

In this edition:

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)
Pronouncement Key dates More information

AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities

Amends AASB 7 Financial Instruments: Disclosures to require an entity to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

Effective for annual periods beginning on or after 1 January 2013

Deloitte podcast (26 mins 11.5 mbs)

IFRS in focus (PDF 71kb)

AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities

Address inconsistencies in current practice when applying the offsetting criteria in AASB 132 Financial Instruments: Presentation

Clarifies the meaning of 'currently has a legally enforceable right of set-off' and 'simultaneous realisation and settlement'

Note: Entities early adopting this standard must also adopt 'Amendments to Australian Accounting Standards – Disclosures- Offsetting Financial Assets and Financial Liabilities' (Amendments to AASB 7).

Effective for annual periods beginning on or after 1 January 2014

Deloitte podcast (26 mins 11.5 mbs)

IFRS in focus (PDF 71kb)

AASB 2012-4 Amendments to Australian Accounting Standards – Government Loans

Gives first-time adopters of AASBs relief from full retrospective application of AASBs when accounting for government loans received at a below market rate of interest on transition.

Effective for annual periods beginning on or after 1 January 2013

IFRS in focus (PDF 69kb)

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle

Amends a number of pronouncements as a result of the 2009–2011 annual improvements cycle

Key amendments include:

  • AASB 1 - repeated application of AASB 1
  • AASB 101 - clarification of the requirements for comparative information
  • AASB 116 - classification of servicing equipment
  • AASB 132 - tax effect of the distribution to holder of equity instruments
  • AASB 134 - interim reports and segment information for total assets and liabilities.
Effective for annual periods beginning on or after 1 January 2013

IFRS in focus (PDF 67kb)

AASB 1048 Interpretation of Standards (revised)

Identifies the Australian Interpretations and classifies them into two groups: those that correspond to an IASB Interpretation and those that do not. Entities are required to apply each relevant Australian Interpretation in preparing financial statements that are within the scope of the Standard

The revised version of AASB 1048 updates the lists of Interpretations for new and amended Interpretations issued since the June 2010 version of AASB 1048.

Effective for annual reporting periods ending on or after 30 June 2012

AASB 1048 (PDF 345kb)

ITC 27 Request for Comment on IASB Request for Information on Post-implementation Review: IFRS 8 Operating Segments

Seeks feedback on whether the IFRS 8 is functioning as intended, as well as more practical information on the challenges and costs associated with implementing the standard

Follows the IASB’s release of the ‘request for information’ as part of its work on a post implementation review of the segment reporting standard.

Comments due to the AASB by 11 October 2012

ITC 27 (PDF 342kb)

International Accounting Standards Board (IASB)
Pronouncement Key dates More information

New editorial corrections to IFRSs*

The IASB posted to its website on 31 July a new batch of Editorial Corrections to IFRSs.

As minor editorial corrections, these changes are effectively immediately applicable

Editorial Corrections to IFRSs (PDF 339kb)

*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)

Meeting Highlights More information
IFRIC regular meeting
10 July 2012

Key issues discussed include:

  • IAS 27 Consolidated and Separate Financial Statements and SIC-13 Jointly Controlled Entities — Non-monetary Contributions by Venturers — Accounting for the loss of control of a group of assets or a subsidiary between an investor and its associate or joint venture
  • IAS 7 Statement of Cash Flows — Examples illustrating the classification of cash flows
  • IAS 18 Revenue, IAS 37 Provisions, Contingent Liabilities and Contingent Assets and IAS 39 Financial Instruments: Recognition and Measurement — Regulatory assets and liabilities
  • IFRS 3 Business Combinations — Continuing employment
  • IAS 1 Presentation of Financial Statements and IAS 12 Income Taxes — Presentation of non-income taxes
  • IAS 12 Income Taxes — Accounting for market value uplifts on assets that are to be introduced by a new tax regime
Deloitte observer notes

IFRIC podcast (link to website)
IASB regular meeting
16-20 July 2012

Topics discussed were as follows (click on the links for direct access to the Deloitte observer notes for that topic):

Deloitte Observer notes

IASB update (PDF 434kb)

IASB podcast (link to website)
AASB regular meeting
25-26 July 2012

Key issues discussed include:

  • financial reporting by superannuation entities
  • financial reporting by not-for-profit entities within the general government sector
  • service concession arrangements – grantors
  • related party disclosures in the not-for-profit public sector
  • income from transactions of not-for-profit entities.
AASB alert (PDF 296kb)

 

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
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
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

Related links

  • Monthly roundup - January 2014
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  • Monthly roundup - January 2012
    Financial reporting developments during January 2012. Monthly highlights include the IASB and the FASB discussion to reduce differences in classification and measurement models for financial instruments.
  • Monthly roundup - July 2013
    Financial reporting developments during July 2013. Monthly highlights discuss the ASIC areas of focus for July 2013 reporting period.
  • Monthly roundup - June 2013
    Financial reporting developments during June 2013. Monthly highlights discuss the ASIC areas of focus for June 2013 reporting period.
  • Monthly roundup - January 2009
  • Monthly roundup - March 2011
    Financial reporting developments during March 2011. Monthly highlight discusses the updated IASB work plan, ASIC's proposed guidance on additional financial information and a joint UK/NZ project to reduce disclosures under IFRS.
  • Monthly roundup - March 2009
  • Monthly roundup - August 2010
    Summary of developments in financial reporting during August 2010. Monthly highlight discusses the possible impact of changes in the IASB and FASB chairs on global standard setting.
  • Monthly roundup - June 2010
    Summary of developments in financial reporting during June 2010. Monthly highlight discusses recent financial reporting reform.
  • Monthly roundup - May 2010
    Summary of developments in financial reporting during May 2010. Monthly highlight discusses the financial reporting impacts of recent and proposed tax changes.

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