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Monthly roundup - December 2009

Staying on top of developments

In this edition:

Monthly highlight: 2010 to be a busy year for standard setting 

The end of 2009 saw a smaller flurry than usual of ‘finalised’ documents being issued by the standard setting bodies, although the AASB did play ‘catch up’ with the IASB in the dying days of the business year.

However, constituents should not be lulled into a false sense of security, as 2010 and 2011 promise a vast array of new pronouncements – so much so that the IASB has begun to seriously debate how to ease the burden by streamlining the process.

The IASB is intending to issue exposure drafts in many key areas by 30 June, with finalised pronouncements to follow in the period through to 30 June 2011 (although past experience may indicate that this timetable might be somewhat ‘flexible’). The list of topics is immense, more significant topics include: financial instruments (hedging, impairment, derecognition), lease accounting, revenue recognition, financial statements, income taxes, insurance, liabilities, equity and more.

Australia will also undergo a complementary transformation with the new differential reporting regime and associated amendments to the Corporations Act 2001 expected to be finalised by 30 June and new requirements likely around executive remuneration disclosure and approval. In addition, the AASB and its New Zealand counterpart, the FRSB, are to work much more closely together in setting standards across the for-profit, not-for-profit and public sectors.

Throw in the usual array of interpretative issues, annual improvement cycles and unforeseen ‘fast tracked’ proposals and it would appear that financial reporting is going to look very different to its current incarnation in a year or two’s time.

So, hang onto your hats and enjoy the ride… we’ll be keeping you informed as changes are anticipated or happen over the months ahead.

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 December 2009 financial reporting cycle summary)

Australian Accounting Standards Board (AASB)
Pronouncement Key dates More information

AASB Consultation Paper Differential Financial Reporting - Reducing Disclosure Requirements, Exposure draft of the Corporations Amendment (Corporate Reporting Reform) Bill 2010, Draft Exposure Draft Revised Differential Reporting Framework and preliminary proposed disclosures under the Reduced Disclosure Regime (RDR)

Proposes significant change to financial reporting in Australia, including:

  • A new differential reporting regime, involving the removal of the ‘reporting entity’ concept and the introduction of a so-called ‘reduced disclosure regime’ for entities without public accountability, i.e. a full IFRS recognition and measurement with limited disclosure approach
  • Removal of the requirement in the Corporations Act to prepare parent entity financial statements where consolidated financial statements are prepared (with limited information disclosed in the notes)
  • A new ‘solvency’ test for the payment of dividends by companies, to replace the current ‘profit’ test
  • Reforms to reporting for companies limited by guarantee, reducing or eliminating the reporting burden for entities using this structure (particularly charities).

In addition, a number of ‘technical’ amendments are proposed to the Corporations Act in areas such as reporting periods, the directors’ declaration, legal protection for solicitor’s representation letters, and so on.

Comments on the AASB Consultation Paper will be formally requested once the accompanying ED is finalised (expected February).

Comments to Treasury on the Corporations Act amendments close on 3 February 2010

Accounting alert 2009/11

Deloitte press release

AASB Consultation Paper (PDF 217kb)

Treasury proposals

Draft AASB exposure draft (being progressively released in draft format until all documents are finalised)

AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9

Introduces new classification and measurement requirements for financial assets, as follows:

  • Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are measured at amortised cost (the use of fair value is optional in some limited circumstances)
  • Investments in equity instruments can be designated as 'fair value through other comprehensive income' with only dividends being recognised in profit or loss
  • All other instruments (including all derivatives) are measured at fair value with changes recognised in the profit or loss (except for instruments in a cash flow hedging relationship)
  • The concept of 'embedded derivatives' does not apply to financial assets within the scope of the Standard and the entire instrument must be classified and measured in accordance with the above guidelines.
Applies from 1 January 2013. Early adoption may be attractive in some cases

Deloitte Australia press release

IAS Plus Update Newsletter (PDF 226kb)

US Heads Up Newsletter (PDF 171kb)

AASB 124 Related Party Disclosures (2009), AASB 2009-12 Amendments to Australian Accounting Standards

Amends the requirements of the previous version of AASB 124 to:

  • Provide a partial exemption from related party disclosure requirements for government-related entities
  • Clarify the definition of a related party
  • Include an explicit requirement to disclose commitments involving related parties.

AASB 2009-12 makes consequential amendments to AASB 8 Operating Segments and also contains a number of editorial corrections to numerous pronouncements.

Applies to annual reporting periods beginning on or after 1 January 2011 IAS Plus Update Newsletter (PDF 68kb)

Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments, AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpretation 19

Requires the extinguishment of a financial liability by the issue of equity instruments to be measured at fair value (preferably using the fair value of the equity instruments issued) with the difference between the fair value of the instrument issued and the carrying value of the liability extinguished being recognised in profit or loss. The Interpretation does not apply where the conversion terms were included in the original contract (such as in the case of convertible debt) or to common control transactions.

Applies to annual periods beginning on or after 1 July 2010 (applied retrospectively from the beginning of the earliest comparative period presented) IAS Plus Update Newsletter (PDF 79kb)

AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement

Makes limited-application amendments to Interpretation 14 AASB 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The amendments apply when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements, permitting the benefit of such an early payment to be recognised as an asset.

Applies to annual periods beginning on or after 1 January 2011 IAS Plus Update Newsletter (PDF 60kb)

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

Editorial corrections*

Amends the following pronouncements:

  • Bound Volume 2009
  • Embedded Derivatives (issued March 2009)
  • Improvements to IFRSs (issued April 2009)
  • Additional Exemptions for First-time Adopters (issued July 2009)
  • Classification of Rights Issues (issued October 2009)
  • IFRS 9 Financial Instruments (issued November 2009)
  • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (issued November 2009)
These amendments effectively apply at the same time as the underlying pronouncements. IASB Editorial corrections

* equivalent pronouncement not yet issued by 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
AASB meeting 9-10 December 2009 The meeting saw an agreement to ‘piecemeal’ issue of the forthcoming exposure draft on differential reporting, the issue of a revised version of AASB 124 Related Party Disclosures and a number of not-for-profit and public sector matters

Accounting alert 2009/12

AASB Action Alert (PDF 69kb)

IASB meeting 15-18 December 2009

Highlights include:

  • Tentative agreement on how the ‘next wave’ of IFRS will be implemented
  • Ongoing discussion on the IASB’s response to the global financial crisis
  • Progress on a revised joint venture standard
  • Discussion on emissions trading and lease accounting.

Australian meeting summary

Deloitte observer notes

IASB Update

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 and IAS Plus Update Newsletters)

IFRS publications
Other publications of interest
Deloitte comment letters
  • Deloitte comment letter (PDF 26kb) on IFRIC's tentative decision not to take onto the IFRIC's agenda a request for an interpretation on the application of IFRS 2 Share-based Payment to transactions in which the manner of settlement is contingent of future events
  • Deloitte comment letter (PDF 17kb) on ED/2009/13 Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters

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 December historical summary on IAS Plus)

  • The Productivity Commission has released its updated report on Executive Remuneration in Australia (Productivity Commission Report, Federal Government press release)
  • The ASX has release a new companies update discussing ASX Corporate Governance Council recommendations on diversity policies, a consultation paper on proposed Listing Rule amendments for company trading policies, and Christmas-New Year trading hours, (ASX Companies Update 09/09)
  • The IASB has launched a three-month trial of downloadable podcast summaries of monthly IASB board meetings (IASB website link)
  • The IASB and FASB will hold a joint meeting Tuesday 5 January 2010, from 12:00 to 16:00pm London time, to discuss the Insurance Contracts and Leases projects
  • The Financial Crisis Advisory Group (FCAG) held its sixth meeting in London on 15 December 2009 to review progress made on its recommendations in its Comprehensive Report (PDF 377kb) (Deloitte observer notes)


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