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What's new in the December 2010 financial reporting cycle

Our popular guide to new and revised financial reporting requirements


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The information on this page was last updated for developments to 30 March 2011. Updated versions of this guide for subsequent reporting periods can be found at www.deloitte.com/au/whatsnew.

The analysis below provides a high level overview of new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2010. Entities can use this listing to perform a quick check that all the new financial reporting requirements have been fully considered as part of their December reporting close process.

The information below is organised as follows:

In addition, we've provided answers to some of the commonly asked questions about the disclosures required in relation to new and revised accounting pronouncements. Read more...

You can also download a printable PDF version of this information at the bottom of the page.

What are the big picture issues for December 2010?

Economic climate

The December 2010 reporting season continues to witness an uncertain economic climate. The economy appears to have improved, growth has returned and interest rates are resuming an upwards trend. However, a quickly appreciating exchange rate, withdrawal of government stimulus, wavering consumer sentiment and contrasting global conditions make for an uncertain environment. Recent natural disasters add a further level of uncertainty. The threat of further shocks cannot be discounted and the continuing number of conflicting indicators reveal the uncertainty lying ahead.

Add to this another level of uncertainty in terms of tax and legislative reform in the context of a finely balanced federal parliament, global glacial moves towards putting a price on carbon (with Australia’s own attempts currently subject to ‘consensus building’), and other developments. The commercial and practical challenges facing companies in this reporting season continue those of previous reporting seasons, with recurring themes of uncertainty, possible shocks and rapid changes in key variables and indicators.

This ongoing variability has been reflected from a financial reporting perspective by IFRS, which is effectively designed to reflect the underlying volatility in prices, values and other variables in financial statements. Accordingly, the current reporting period continues the ‘challenge’ of bringing all these competing factors together to produce a set of financial statements reflecting economic realities, market expectations and operating conditions.

A wide range of impacts might need to be considered – including impairment (as well as the possibility of reversals of previous impairment losses in some cases), fair value determination (for tangible, intangible and financial assets as appropriate), provisions and contingencies. On top of the recognition and measurement requirements, there is an ever growing list of disclosure requirements to consider and prepare for, and possible changes in Australia’s corporations laws as well.

All of this under the eyes of an increasingly active regulator, continuing to widen both the number and scope of reviews.


Key considerations

After the large number of changes introduced in the last reporting season for the majority of entities (e.g. format of financial statements), the December reporting period presents somewhat of a hiatus in financial reporting changes (although the revised business combination accounting requirements mandatorily apply for the first time in full-year financial statements). Whilst there are some new or amended requirements (e.g. annual improvements) that may impact particular entities, there are not a large number of ‘big ticket’ substantial changes to be considered from a pure accounting perspective.

However, there are a number of regulatory and framework changes that need to be considered in the current reporting season:

  • Declaration of dividends - companies need to take particular care when declaring dividends, as new 'solvency' requirements under the Corporations Act 2001 for the payment of dividends apply from the time from Royal Assent of the Corporations Amendment (Corporate Reporting Reform) Act 2010 (28 June 2010). The declaration of dividends under the new regime raises a number of potential legal and taxation issues and caution is warranted
  • Elimination of parent entity columns – amendments to the Corporations Act 2001 have eliminated the requirement to provide separate financial statements for the parent entity in conjunction with consolidated financial statements. Instead, the notes to the financial statements are required to disclose limited financial information about the parent. This will see a substantial reduction in the amount of financial information presented throughout the financial statements and may make financial statements easier to understand
  • Changes to the directors' declaration – amendments to the Corporations Act 2001 require companies, registered schemes and disclosing entities making an explicit and unreserved statement of compliance with IFRS in the notes to the financial statements to include reference to this statement in their directors’ declaration
  • AASB differential reporting regime – voluntary early adoption of the AASB’s new differential reporting framework, particularly the 'Reduced Disclosure Requirements' (RDR) would permit for-profit reporting entities without ‘public accountability', not-for-profit entities that are reporting entities and some public sector entities to present substantially less disclosure than in the past.

More information about the above topics (including illustrative parent entity disclosures and an example directors’ declaration) can be found in Accounting alert 2010/08.

Of course, the devil is often in the detail and there are numerous other financial reporting changes that need to be considered, with more likely between the publish date of our models and the end of the reporting period.

Other considerations

The other considerations for December 2010 include:

  • [NEW] Floods and other natural disasters – the floods in Queensland, Victoria and other parts of Australia have caused substantial damage. Bush fires have raged in Western Australia. Where an entity is affected by these types of natural disasters, the accounting impacts should generally be reflected in the accounting period in which they occur. For example, as the Brisbane floods occurred in January, the majority of their impacts would not be accounted for in financial statements ending on 31 December 2010. However, material impacts arising before the finalisation of the financial statements should be disclosed in the notes as a non-adjusting subsequent event (“Type 2” in the old parlance) and may require disclosure to the ASX for listed entities. Furthermore, insurance recoveries are subject to a ‘virtually certain’ test, creating a high recognition hurdle which may mean recognition very late in the claim process. In extreme cases, going concern considerations may also arise
  • IASB projects - the IASB continues to actively pursue a number of projects proposing significant changes and a raft of finalised standards, exposure drafts and other pronouncements in the lead up to June 2011. Careful consideration of these impacts now can avoid challenges and maximise opportunities going forward, e.g. lease accounting (consider in lease negotiations), ,revenue recognition (impact on current accounting policies) and tax accounting (uncertainty in current year's tax returns). The IASB also continues to consider ‘fast-tracked’ changes to standards through its annual improvements process and specific amendments which can have significant impacts in particular circumstances (e.g. rights issues, deferred tax consequences of certain revalued assets). More information can be found in our IFRS resources and on our IAS Plus website
  • Taxation changes – many entities will be affected by enacted or proposed tax legislation in such areas as the taxation of financial instruments (TOFA), the ‘Small business and general business tax break’, tax-consolidation changes, and other possible changes (e.g. the proposed Mining Resource Rent Tax). Care needs to be taken to ensure the accounting implications of these tax changes are appropriately anticipated and addressed in financial reporting. More information can be found in Accounting alert 2010/06
  • Carbon - notwithstanding the lack of an enacted carbon pricing mechanism in the Australian economy, the effects of carbon cannot be ignored in financial reporting or the wider business context. In addition, existing legislation requires an increasing number of entities to monitor their carbon emissions and the uncertainty surrounding a carbon price is being reflected in market transactions in industries heavily exposed to carbon. Direct and indirect financial reporting impacts in areas such as fair values, impairment, disclosure of uncertainties, hedging programs, provisions and contingent liabilities may need to be considered. More information can be found in Accounting alert 2009/03
  • New Zealand convergence – the AASB and New Zealand Financial Reporting Standards Board (FRSB) are working on a the first phase of a project which seeks to converge accounting standards between Australia and New Zealand. The Boards are likely to finalise the first standards arising from this process during the December reporting season and early adoption of the revised standards may be favourable in some cases. More information can be found in Accounting alert 2010/09 and Accounting alert 2010/12.

For more detailed information and illustrative disclosures about these topics, refer to our Model financial statements or our global illustrative financial statements and checklists.


What are the new and revised accounting pronouncements for December 2010?

The tables below outline the new and revised pronouncements that are to be applied for the first time at 31 December 2010, or which may be early adopted at that date.

In the majority of cases, the disclosure requirements of the pronouncements listed in the tables below would not be applicable to half-year financial reports. However, where relevant, the recognition and measurement requirements of any relevant pronouncements would be applied where those pronouncements have been adopted by the entity.

As occurs so often with changes to accounting standards and financial reporting requirements, some of the other new or revised pronouncements listed in the tables below may have a substantial impact on particular entities. Therefore, it is important that the pronouncements listed are carefully reviewed for any potential impacts or opportunities.

Where early adoption is being contemplated, it is important to address any necessary procedural requirements, e.g. for entities reporting under the Corporations Act 2001, appropriate director's resolutions for early adoption must be made under s.334(5). Disclosure in the financial statements must also be addressed.

In addition, the disclosure requirements required in relation to new and revised accounting pronouncements need to be carefully considered even where they have not yet been adopted. Read more...

New and revised IFRS-equivalent Standards
New or revised requirement When effective 31 December 2010 applicability More information
Full years Half years

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

AASB 1 First-time Adoption of Australian Accounting Standards (May 2009)

A new version of AASB 1 resulting from the IASB's 2007 annual improvements process which retains the substance of the previous version, but within a changed structure to make it easier for the reader to understand and to better accommodate future changes.

Applies to an entity's first Australian-Accounting-Standards financial statements for reporting periods beginning on or after 1 July 2009 n/a
(mandatory only for first-time adopters)
n/a
(mandatory only for first-time adopters)
IAS Plus Newsletter [updated] (PDF 113kb)

AASB 3 Business Combinations (2008), AASB 127 Consolidated and Separate Financial Statements (2008), AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 and AASB 2008-11 Amendments to Australian Accounting Standard - Business Combinations Among Not-for-Profit Entities

Revised standards resulting from the joint IASB-FASB Business Combinations Phase II project, equivalent to revised IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements. Alters the manner in which business combinations and changes in ownership interests in subsidiaries are accounted for. There are also consequential amendments to other standards effected through AASB 2008-3, most notably AASB 128 Investments in Associates and AASB 131 Interests in Joint Ventures.

AASB 2008-11 confirms that business combinations involving not-for-profit entities are within the scope of AASB 3. This has the effect of requiring assets acquired in a merger of not-for-profit entities to be re-measured, normally at fair value, as at the date of the merger (with special rules for local governments).

AASB 3 - applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009

AASB 127 - amendments generally apply prospectively to annual reporting periods beginning on or after 1 July 2009

AASB 2008-3 and AASB 2008-11 - applies to annual reporting periods beginning on or after 1 July 2009

Mandatory Already implemented Accounting alert 2008/03
Accounting alert 2008/01
Deloitte Australia Insights podcast
IAS Plus Newsletter (PDF 122kb)
IAS Plus project page

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

AASB 9 introduces new requirements for classifying and measuring 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
  • 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.

Note: In October 2010, the IASB reissued IFRS 9 ‘Financial Instruments’, including revised requirements for financial liabilities and carrying over the existing derecognition requirements from IAS 39 ‘Financial Instruments: Recognition and Measurement’. On 15 December 2010, the AASB publicly released AASB 9 'Financial Instruments' (December 2010) and AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)', which supersedes AASB 9 (December 2009). However, for annual reporting periods beginning before 1 January 2013, an entity may early adopt AASB 9 (December 2009) instead of AASB 9 (December 2010).

Applies on a modified retrospective basis to annual periods beginning on or after 1 January 2013 Optional
(see note regarding early adoption)
Optional
(see note regarding early adoption)
IAS Plus Update Newsletter (PDF 226kb)
Deloitte Australia press release

[NEW] AASB 9 Financial Instruments (December 2010), AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)

A revised version of AASB 9 incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from AASB 139 Financial Instruments: Recognition and Measurement.

The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity's own credit risk is presented in other comprehensive income rather than within profit or loss.

Note: This Standard supersedes AASB 9 (December 2009). However, for annual reporting periods beginning before 1 January 2013, an entity may early adopt AASB 9 (December 2009) instead of applying this Standard.

Applies on a modified retrospective basis to annual periods beginning on or after 1 January 2013 Optional
(see note regarding early adoption)
Optional
(see note regarding early adoption)
IAS Plus Update 10-24
IFRS in Focus Newsletter (PDF 82kb)

 

New or revised domestic Standards
New or revised requirement When effective 31 December 2010 applicability More information
Full years Half years

AASB 1048 Interpretation of Standards (June 2010)

Updated version of this 'service standard' to provide a mandatory requirement to comply with Interpretations in the Australian context. This version removes references to versions of Interpretations that do not apply to any of the reporting periods to which the Standard mandatorily applies, adds Interpretation 19, and includes amended versions of Interpretations since March 2009, where applicable to any reporting period to which the Standard mandatorily applies.

Note: AASB 1048 was previously cited as 'Application and Interpretation of Standards' but its name has been revised in conjunction with the issue of AASB 1053 'Application of Tiers of Australian Accounting Standards'.

AASB 1048 applies to annual reporting periods ending on or after 30 June 2010 but contains specific application dates for each Interpretation (refer to Interpretations below) Mandatory (refer to Interpre-
tations below
)
Mandatory (refer to Interpre-
tations below
)
See the related Interpre-
tations below

AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements

These Standards together implement ‘stage 1’ of the AASB’s revised differential reporting regime.

AASB 1053 establishes a differential financial reporting framework consisting of two tiers of reporting requirements for general purpose financial statements:

  • Tier 1: Australian Accounting Standards
  • Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements (‘RDR’).

AASB 2010-2 makes amendments to each Standard and Interpretation indicating the disclosures not required to be made by ‘Tier 2’ entities. In some cases, additional ‘RDR” paragraphs are inserted requiring simplified disclosures.

The following entities apply either Tier 2 (RDR) or Tier 1 (‘full’ Australian Accounting Standards) in preparing general purpose financial statements:

  • For-profit private sector entities that do not have public accountability
  • All not-for-profit private sector entities
  • Public sector entities other than Federal, State, Territory and Local Governments.

Regulators may have the power to require the application of ‘full’ Australian Accounting Standards (Tier 1) by the entities they regulate.

Note: The AASB is yet to consider RDR simplifications to certain standards, including AASB 4, AASB 1023, AASB 1038 and AAS 25. These will be subject of an additional consultative document. In addition, the AASB is now issuing ‘Tier 2’ exposure drafts in relation to recent IASB proposals, seeking input into how the proposed disclosures should be implemented in the RDR environment. 'Stage 2' of the AASB's differential reporting project will consider whether to extend the revised differential reporting framework to all financial statements prepared under Australian Accounting Standards, including entities currently considered 'non-reporting entities'.

Applies to annual reporting periods beginning on or after 1 July 2013 but may be early adopted for annual reporting period beginning on or after 1 July 2009 Optional
(for eligible entities)
Optional
(for eligible entities)

Accounting alert 2010/08
RDR model financial reports

RDR versions of standards (link to AASB website)

 

New Amending Standards

The table below lists the Amending Standards that do not relate to the pronouncements listed in other tables.

New or revised requirement When effective 31 December 2010 applicability More information
Full years Half years

AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

Makes amendments to AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards and AASB 5 Non-current Assets Held for Sale and Discontinued Operations to include requirements relating to a sale plan involving the loss of control of a subsidiary. The amendments require all the assets and liabilities of such a subsidiary to be classified as held for sale and clarify the disclosures required when the subsidiary is part of a disposal group that meets the definition of a discontinued operation.

Applies retrospectively to annual reporting periods beginning on or after 1 July 2009 Mandatory Already implemented Accounting alert 2008/09
IAS Plus Newsletter (PDF 136kb)
IAS Plus project page

AASB 2008-8 Amendments to Australian Accounting Standards - Eligible Hedged Items

Clarifies the hedge accounting provisions of AASB 139 Financial Instruments: Recognition and Measurement to address:

  • Inflation in a financial hedged item - inflation may only be hedged if changes in inflation are a contractually specified portion of cash flows of a recognised financial instrument
  • A one-sided risk in a hedged item - the amendments make clear that the intrinsic value, not the time value, of an option reflects a one-sided risk and, therefore, an option designated in its entirety cannot be perfectly effective.
Applies retrospectively to annual reporting periods beginning on or after 1 July 2009 Mandatory Already implemented IAS Plus Newsletter (PDF 140kb)
IAS Plus project page

AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Process

Introduces amendments into Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its standards. A number of the amendments are technical changes to other pronouncements as the result of the issue of AASB 3 Business Combinations (2008), to align the scope of the pronouncements or to implement other consequential amendments.

A further amendment changes the restriction in Interpretation 16 Hedges of a Net Investment in a Foreign Operation on the entity that can hold hedging instruments.

Applies to annual reporting periods beginning on or after 1 July 2009 Mandatory Already implemented IAS Plus Update Newsletter (PDF 104kb)

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process

Introduces amendments into Accounting Standards that are equivalent to those made by the IASB under its program of annual improvements to its standards. A number of the amendments are largely technical, clarifying particular terms, or eliminating unintended consequences.

Other changes are more substantial, such as the current/non-current classification of convertible instruments, the classification of expenditures on unrecognised assets in the statement of cash flows and the classification of leases of land and buildings.

Note: The amendments made to the guidance to AASB 118 'Revenue' regarding determining whether an entity is acting as agent or principal have no explicit application date and we understand that they are taken to be immediately applicable.

Applies to annual reporting periods beginning on or after 1 January 2010
(see note in previous column regarding guidance in AASB 118)
Mandatory Mandatory IAS Plus Update Newsletter (PDF 104kb)

AASB 2009-7 Amendments to Australian Accounting Standards

This Standard makes amendments to AASB 5, AASB 7, AASB 139 and Interpretation 17 to correct errors that occurred in AASB 2008-12 Amendments to Australian Accounting Standards Reclassification of Financial Assets Effective Date and Transition, AASB 2008-13 Amendments to Australian Accounting Standards arising from AASB Interpretation 17 Distributions of Non-cash Assets to Owners and Interpretation 17 itself. The other amendments reflect changes made by the IASB to its pronouncements.

These editorial amendments have no major impact on the requirements of the amended pronouncements.

Applies to annual reporting periods beginning on or after 1 July 2009 Mandatory Already implemented Accounting alert 2009/07

AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions

Amends AASB 2 Share-based Payment to clarify the accounting for group cash-settled share-based payment transactions. An entity receiving goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash.

The amendments to AASB 2 also incorporate guidance previously included in Interpretation 8 Scope of AASB 2 and Interpretation 11 AASB 2 - Group and Treasury Share Transactions and as a consequence these two Interpretations are superseded by the amendments.

Applies to annual periods beginning on or after 1 January 2010 and must be applied retrospectively Mandatory Mandatory IAS Plus Update Newsletter (PDF 114kb)
IAS Plus Project page

AASB 2009-9 Amendments to Australian Accounting Standards - Additional Exemptions for First-time Adopters

Provides additional exemptions and modifications on transition to Australian Accounting Standards in relation to certain oil and gas assets in development or production, decommissioning, restoration and similar liabilities related to those assets, and Interpretation 4 lease assessments made under equivalent requirements of pre-transition GAAP.

Applies to annual reporting periods beginning on or after 1 January 2010 n/a
(Mandatory for first-time adopters only)
n/a
(Mandatory for first-time adopters only)
IAS Plus Update Newsletter (PDF 78kb)

AASB 2009-10 Amendments to Australian Accounting Standards - Classification of Rights Issues

Amends AASB 132 Financial Instruments: Presentation to require a financial instrument that gives the holder the right to acquire a fixed number of the entity's own equity instruments for a fixed amount of any currency to be classified as an equity instrument if, and only if, the entity offers the financial instrument pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. Prior to this amendment, rights issues (rights, options, or warrants) denominated in a currency other than the functional currency of the issuer were accounted for as derivative instruments.

Applies to annual reporting periods beginning on or after 1 February 2010 Optional Mandatory IAS Plus Update Newsletter (PDF 52kb)

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 reporting periods beginning on or after 1 January 2011 (applied retrospectively from the beginning of the earliest comparative period presented) Optional Optional IAS Plus Update Newsletter (PDF 60kb)

AASB 2010-1 Limited Exemption from Comparative AASB 7 Disclosures for First-time Adopters - Amendment to AASB 1

Provides additional exemption on IFRS transition in relation to AASB 7 Financial Instruments: Disclosures, to avoid the potential use of hindsight and to ensure that first-time adopters are not disadvantaged as compared with current IFRS-compliant preparers.

Applies to annual reporting periods beginning on or after 1 July 2010 n/a
(Optional for first-time adopters)
n/a
(Mandatory for first-time adopters)
IAS Plus Update Newsletter (PDF 79kb)

AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

Amends a number of pronouncements as a result of the IASB's 2008-2010 cycle of annual improvements to provide clarification of certain matters.

The key clarifications include:

  • The measurement of non-controlling interests in a business combination
  • Transition requirements for contingent consideration from a business combination that occurred before the effective date of the revised AASB 3 Business Combinations (2008)
  • Transition requirements for amendments arising as a result of AASB 127 Consolidated and Separate Financial Statements.

Note: The amendments to AASB 3 may be applied early only to annual reporting periods beginning on or after 30 June 2007 but before 1 July 2010.

Applies to annual reporting periods beginning on or after 1 July 2010 Optional
(see note regarding early adoption)
Mandatory IAS Plus Update Newsletter (PDF 77kb)

AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

Amends a number of pronouncements as a result of the IASB's 2008-2010 cycle of annual improvements.

Key amendments include:

  • Financial statement disclosures - clarification of content of statement of changes in equity (AASB 101), financial instrument disclosures (AASB 7) and significant events and transactions in interim reports (AASB 134)
  • Interpretation 13 - fair value of award credits
  • AASB 1 - accounting policy changes in year of adoption and amendments to deemed cost (revaluation basis, regulatory assets).
Applies to annual reporting periods beginning on or after 1 January 2011 Optional Optional IAS Plus Update Newsletter (PDF 77kb)

AASB 2010-5 Amendments to Australian Accounting Standards

This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB.

These amendments have no major impact on the requirements of the amended pronouncements.

Applies to annual reporting periods beginning on or after 1 January 2011 Optional Optional  -

[NEW] AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets

Makes amendments to AASB 7 Financial Instruments: Disclosures resulting from the IASB's comprehensive review of off balance sheet activities.

The amendments introduce additional disclosures, designed to allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

Note: In the first year of application, comparative information is not required.

Applies to annual periods beginning on or after 1 July 2011 Optional Optional IAS Plus Update 10-21
IFRS in Focus newsletter (PDF 139kb)
IASB Press Release (PDF 36kb)
IAS Plus article

[NEW] AASB 2010-8 Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets

Amends AASB 112 Income Taxes to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in AASB 140 Investment Property will, normally, be through sale.

As a result of the amendments, Interpretation 112 Income Taxes — Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into AASB 112 the remaining guidance previously contained in Interpretation 112, which is accordingly withdrawn.

Applicable to annual periods beginning on or after 1 January 2012 Optional Optional IFRS in Focus newsletter (PDF 61kb)

[NEW] AASB 2010-9 Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

Amends AASB 1 First-time Adoption of Australian Accounting Standards to:

  • Replace references to a fixed date of ‘1 January 2004’ with ‘the date of transition to Australian Accounting Standards’, thereby providing relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards
  • Provide guidance for entities emerging from severe hyperinflation either to resume presenting Australian-Accounting-Standards financial statements or to present Australian-Accounting-Standards financial statements for the first time.

Note: This amendment, particularly in relation to 'fixed dates', may be relevant for entities moving to 'Tier 1' under the AASB's revised differential reporting framework (see above).

Applicable to annual periods beginning on or after 1 July 2011 Optional
(for first-time adopters)
Optional
(for first-time adopters)
IFRS in Focus newsletter ('fixed dates', PDF 77kb)
IFRS in Focus newsletter (severe hyperinflation, PDF 59kb)

[NEW] AASB 2010-10 Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters

Amends AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) to replace references to a fixed date of ‘1 January 2004’ with ‘the date of transition to Australian Accounting Standards’, thereby providing relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards.

Early application of the amendments in this Standard is permitted in accordance with the early application provisions of AASB 2009-11 or AASB 2010-7, as relevant.

Applicable to annual reporting periods beginning on or after 1 January 2013 Optional
(for first-time adopters, see note)
Optional
(for first-time adopters, see note)
IFRS in Focus newsletter ('fixed dates', PDF 77kb)
IFRS in Focus newsletter (severe hyperinflation, PDF 59kb)

 

New and revised Interpretations
New or revised requirement When effective 31 December 2010 applicability More information
Full years Half years

Interpretation 17 Distributions of Non-Cash Assets to Owners and AASB 2008-13 Amendments to Australian Accounting Standards arising from AASB Interpretation 17 Distributions of Non-Cash Assets to Owners

Requires:

  • A dividend payable to be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity
  • An entity to measure the dividend payable at the fair value of the net assets to be distributed
  • An entity to recognise the difference between the dividend paid and the carrying amount of the net assets distributed in profit or loss
  • An entity to provide additional disclosures if the net assets being held for distribution to owners meet the definition of a discontinued operation.

AASB 2008-13 makes consequential amendments to AASB 5 Non-current Assets Held for Sale and Discontinued Operations and AASB 110 Events After the Reporting Period.

Applies prospectively to annual reporting periods beginning on or after 1 July 2009 Mandatory
(see note regarding early adoption)
Already implemented IAS Plus Update Newsletter (PDF 104kb)

Interpretation 18 Transfers of Assets from Customers

The Interpretation clarifies the accounting for agreements in which an entity receives from a customer an item of property, plant and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services (such as a supply of electricity, gas or water).

The key requirements of the Interpretation include:

  • An asset is only recognised where it meets the definition of an asset in the Framework
  • Transferred assets that meet the definition of an asset are initially recognised at fair value
  • Revenue arising from the recognition of the transferred assets is recognised in accordance with the requirements of AASB 118 Revenue. Revenue may involve one or more services in exchange for the transferred item, such as connecting the customer to a network, providing the customer with ongoing access to a supply of goods or services, or both.
Applies to transfers of assets from customers received on or after 1 July 2009 Mandatory for all transfers received after 1 July 2009 Mandatory for all transfers received after 1 July 2009 IAS Plus Update Newsletter (PDF 107kb)
IAS Plus summary

Interpretation 19 Extinguishing Liabilities with Equity Instruments

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) Optional Mandatory IAS Plus Update Newsletter (PDF 79kb)

 

Pronouncements approved by the IASB/IFRIC where an equivalent pronouncement has not been issued by the AASB
New or revised requirement When effective 31 December 2010 applicability More information
Full years Half years

International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)

This Standard provides an alternative framework that can be applied by eligible entities in place of the full set of International Financial Reporting Standards (IFRSs) on issue.

The IFRS for SMEs is a self-contained Standard, incorporating accounting principles that are based on full IFRSs but that have been simplified to suit the entities within its scope (known as SMEs). By removing some accounting treatments permitted under full IFRSs, eliminating topics and disclosure requirements that are not generally relevant to SMEs, and simplifying requirements for recognition and measurement, the IFRS for SMEs reduces the volume of accounting requirements applicable to SMEs by more than 90 per cent when compared with the full set of IFRSs.

The IASB has not set an effective date for the Standard because the decision as to whether to adopt the IFRS for SMEs (and also, therefore, the timing for adoption) is a matter for each jurisdiction The AASB has decided not to implement the IFRS for SMEs in the Australian context at this time, instead introducing a revised differential reporting regime based on full recognition and measurement of IFRSs but with reduced disclosure IAS Plus Update Newsletter (PDF 86kb)
Accounting alert 2010/08

Amendments to IFRS 7 Financial Instruments: Disclosures

Issued by IASB as part of its comprehensive review of off balance sheet activities.

The amendments introduce additional disclosures, designed to allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example, securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

Note: In the first year of application, comparative information is not required.

[UPDATE] On 18 November 2010, the AASB issued an equivalent Amending Standard, AASB 2010-6 'Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets'.

Applies to annual periods beginning on or after 1 July 2011 Optional Optional IAS Plus Update 10-21
IFRS in Focus newsletter (PDF 139kb)
IASB Press Release (PDF 36kb)
IAS Plus article

IFRS 9 Financial Instruments (October 2010)

A revised version of IFRS 9 incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over the existing derecognition requirements from IAS 39.

The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity's own credit risk is presented in other comprehensive income rather than within profit or loss.

[UPDATE] On 15 December 2010, the AASB publicly released AASB 9 'Financial Instruments' (December 2010) and AASB 2010-7 'Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)', implementing equivalent pronouncements in the Australian context.

Applies to annual periods beginning on or after 1 January 2013 Optional Optional IAS Plus Update 10-24
IFRS in Focus Newsletter (PDF 82kb)
IASB press release (PDF 33kb)

Conceptual Framework for Financial Reporting 

First phase of the IASB and FASB joint project to develop an improved revised conceptual framework for International Financial Reporting Standards (IFRSs) and US generally accepted accounting practices (US GAAP).

The first phase deals with the objective and qualitative characteristics of financial reporting, incorporating the following chapters:

  • Chapter 1 The objective of financial reporting
  • Chapter 3 Qualitative characteristics of useful financial information
  • Chapter 4 The 1989 Framework: the remaining text.

Note: The Conceptual Framework project is being conducted in phases. As a chapter is finalised, the relevant paragraphs in the ‘Framework for the Preparation and Presentation of Financial Statements’ that was published in 1989 will be replaced. Chapter 2 will deal with the reporting entity concept.

The Conceptual Framework is not an IFRS and hence does not define standards for any particular measurement or disclosure issue. Nothing in the Conceptual Framework overrides any specific IFRS Applicable once equivalent Framework adopted by the AASB Applicable once equivalent Framework adopted by the AASB IFRS in Focus Newsletter (PDF 67kb)
IASB press release (PDF 45kb)
IAS Plus article

Editorial Corrections (October 2010)

A new batch of Editorial Corrections to IFRSs which includes editorial corrections and changes to IFRS for SMEs (issued July 2009), IFRS 9 Financial Instruments (issued November 2009), Bound Volume (Red Book) 2010, Bound Volume (Blue Book) 2010, Improvements to IFRSs (issued May 2010) and IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets (issued October 2010).

As minor editorial corrections, these changes are effectively immediately applicable under IFRS Optional
(once equivalent amendments are made by the AASB)
Optional
(once equivalent amendments are made by the AASB)
IAS Plus article

[NEW] International Financial Reporting Standard (IFRS) Practice Statement Management Commentary

A broad, non-binding framework for the presentation of narrative reporting to accompany financial statements prepared in accordance with IFRSs.

Management commentary is a narrative report that accompanies but is presented outside of the financial statements, setting out management's explanation of the enterprise's financial condition, changes in financial condition, results of operations, and causes of changes in material line items.

The Practice Statement is not an IFRS. Consequently, entities applying IFRSs are not required to comply with the Practice Statement, unless specifically required by their jurisdiction.

[UPDATE] On 29 March 2011, the AASB has made this IFRS Practice Statement available to Australian constituents as guidance for entities to consider when presenting narrative reporting to accompany general purpose financial statements prepared in accordance with Australian Accounting Standards. The AASB acknowledges other guidance on management commentary already exists in Australia, and that existing guidance might take precedence over the IFRS Practice Statement. Entities are still required to comply with all applicable laws and regulations.

An entity may apply the Practice Statement to management commentary presented prospectively from 8 December 2010 Optional
(if, and once, an equivalent pronouncement is made by the AASB)
Optional
(if, and once, an equivalent pronouncement is made by the AASB)
IFRS in Focus newsletter (PDF 91kb)

[NEW] Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)

Amends IAS 12 Income Taxes to provide a presumption that recovery of the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property will, normally, be through sale.

As a result of the amendments, SIC-21 Income Taxes — Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly withdrawn.

[UPDATE] On 12 January 2011, the AASB publicly released AASB 2010-8 'Amendments to Australian Accounting Standards – Deferred Tax: Recovery of Underlying Assets', implementing equivalent amendments in the Australian context.

Applicable to annual periods beginning on or after 1 January 2012 Optional Optional IFRS in Focus newsletter (PDF 61kb)

[NEW] Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS 1)

Amends IFRS 1 First-time Adoption of International Financial Reporting Standards (IFRSs) to:

  • Replace references to a fixed date of ‘1 January 2004’ with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs
  • Provide guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.

[UPDATE] On 12 January 2011, the AASB publicly released AASB 2010-9 'Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters' and AASB 2010-10 'Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters', implementing equivalent amendments in the Australian context.

Applicable to annual periods beginning on or after 1 July 2011 Optional
(for first-time adopters)
Optional
(for first-time adopters)
IFRS in Focus newsletter ('fixed dates', PDF 77kb)
IFRS in Focus newsletter (severe hyperinflation, PDF 59kb)

[NEW] Editorial Corrections (December 2010)

A further batch of Editorial Corrections to IFRSs, issued on 23 December 2010. Includes editorial corrections and changes to Bound Volume (Red Book) 2010, Bound Volume (Blue Book) 2011, IFRS 7 Financial Instruments: Disclosures – Transfers of Financial Assets (issued October 2010), IFRS 9 Financial Instruments (issued October 2010) and The Conceptual Framework for Financial Reporting (issued September 2010).

As minor editorial corrections, these changes are effectively immediately applicable under IFRS Optional
(once equivalent amendments are made by the AASB)
Optional
(once equivalent amendemnts are made by the AASB)
IAS Plus article

[NEW] Editorial Corrections (February 2011)

A new batch of Editorial Corrections to IFRSs, issued on 4 February 2011. This batch includes editorial corrections and changes to Bound Volume (Red Book) 2010, Bound Volume (Blue Book) 2011, Improvements to IFRSs (issued May 2010), The Conceptual Framework for Financial Reporting (issued September 2010), Disclosures—Transfers of Financial Assets (issued October 2010), IFRS 9 Financial Instruments (issued October 2010), Deferred Tax: Recovery of Underlying Assets (issued December 2010) and Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (issued December 2010).

As minor editorial corrections, these changes are effectively immediately applicable under IFRS Optional
(once equivalent amendments are made by the AASB)
Optional
(once equivalent amendments are made by the AASB)
IAS Plus article

[NEW] Editorial Corrections (March 2011)

A new batch of Editorial Corrections to IFRSs, issued on 8 March 2011. This batch makes editorial corrections and changes to IFRS 9 Financial Instruments (issued October 2010), Bound Volume (Blue Book) 2011 and Bound Volume (Red Book) 2011.

As minor editorial corrections, these changes are effectively immediately applicable under IFRS Optional
(once equivalent amendments are made by the AASB)
Optional
(once equivalent amendments are made by the AASB)
IAS Plus article

 

Corporations Act 2001 developments

The following developments related to the Corporations Act 2001 may have direct or indirect impacts on financial reporting:

Development When effective More information

Corporations Amendment (Corporate Reporting Reform) Act 2010 and Corporations Amendment Regulations 2010 (No. 6)

Implements a number of financial reporting related amendments to the Corporations Act 2001 and associated regulations, including:

  • Parent entity information - parent entity columns are no longer required in consolidated financial statements, instead financial information of the parent entity is disclosed by way of note in the annual financial statements
  • IFRS declaration - companies, registered schemes and disclosing entities making an explicit and unreserved statement of compliance with IFRS must include reference to this statement in their directors’ declaration
  • Declaration of dividends - dividends are permitted to be paid where (a) assets exceed liabilities by an amount sufficient to pay the dividend (b) the payment is fair and reasonable and (c) no material prejudice to the ability to pay creditors
  • Companies limited by guarantee - the way in which companies limited by guarantee report has been overhauled – a new three-tiered differential reporting framework has been introduced, including changes to audit requirements and a prohibition on the payment of dividends (the latter applying only to companies limited by guarantee incorporated after commencement of the Act).
  • Financial years - entities are more easily able to change their financial year, without the need to apply to ASIC (in many cases)
  • Directors' reports - expansion of existing listed public company requirements for directors’ reports to all listed entities
  • A number of other technical amendments.

Note: ASIC has made Class Order [CO 10/654] and Class Order [CO 10/655] dealing with technical matters arising from this legislation.

Most of the amendments apply from commencement (28 June 2010, being the date of Royal Assent), or 30 June 2010

The regulations became effective on 29 June 2010

Accounting alert 2010/08

ASIC Class Order [CO 09/626] Financial reporting relief - changes to notice lodging

Implements changes to form-lodging arrangements for companies wishing to take advantage of relief under Class Order 98/98 Small proprietary companies which are controlled by a foreign company but which are not part of a large group and Class Order 98/1418 Wholly-owned entities. The changes mean that companies relying on relief in [CO 98/98] will be able to lodge opt-in and opt-out forms at any time during a 19-month period commencing three months before the start of the relevant financial year and ending four months after the end of the financial year.

Effective 11 August 2009
(date of registration)
ASIC Class Order (PDF 21kb)
ASIC press release

ASIC Class Order [CO 10/654] Inclusion of parent entity financial statements in financial reports

Overcomes some unintended consequences resulting from the Corporations Amendment (Corporate Reporting Reform) Act 2010 by allowing companies, registered schemes and disclosing entities that present consolidated financial statements to include parent entity financial statements as part of their financial report under Chapter 2M of the Corporations Act 2001.

Entities taking advantage of the relief are not required to present the summary parent entity information otherwise required by regulation 2M.3.01 of the Corporations Regulations 2001 but must otherwise comply with the requirements of Part 2M.3 of the Act in the preparation of parent entity information.

Effective 29 July 2010
(date of registration)
ASIC Class Order (PDF 19kb)
ASIC press release
Accounting alert 2010/08

ASIC Class Order [CO 10/655] Variation of Class Orders [CO 01/1455], [CO 04/672] and [CO 05/642] 

Varies a number of other class orders, as a consequence of making of Class Order [CO 10/654] Inclusion of parent entity financial statements in financial reports. The variations made to Class Order [CO 05/642] allow stapled entities that together prepare a single financial report under that class order to avail themselves of the changes resulting from the Corporations Amendment (Corporate Reporting Reform) Act 2010 and Class Order [CO 10/654]. The variations made to Class Orders [CO 01/1455] and [CO 04/672] reflect ASIC's view that Class Order [CO 10/654] is a technical class order and reliance on it by an entity should not prevent the entity from taking advantage of the transaction specific disclosure rules and the "cleansing notice" on-sale exemptions in the Corporations Act 2001.

Effective 29 July 2010
(date of registration)
ASIC Class Order (PDF 23kb)
ASIC press release
Accounting alert 2010/08

[NEW] ASIC Regulatory Guide 76 Related party transactions [RG 76]

Provides guidance for public companies and registered managed investment schemes (registered schemes) on the application of the Corporations Act and ASIC’s expectations in relation to various aspects of related party transactions. These include the decision to enter into a related party transaction, whether to seek member approval, and what information to include in meeting materials for the approval of related party transactions and other disclosure documents.

Issued 30 March 2011 RG 76
ASIC press release

 

Other developments

The following are other developments that may have direct or indirect impacts on financial reporting:

  • [NEW] On 22 December 2010, ASIC released its review of 30 June 2010 financial reports and focuses for 31 December 2010, including:
    • Reporting performance and business drivers - operating and financial review, alternate profits, segment reporting
    • Control and significant influence
    • Current market conditions - going concern, asset impairment, fair value of assets, financial instruments disclosures, current vs. non-current classifications and disclosures for estimates and accounting policy judgements
    • Other matters - business combinations, debt vs. equity, other comprehensive income and providing information, explanations and assistance to auditors.
    The ASIC media release is available from the ASIC website
  • The Financial Reporting Panel has released its first four reports on complex accounting matters referred to it. The Panel is an independent statutory authority which was established in 2006 to determine disputes between ASIC and entities concerning the application of accounting standards and other financial reporting requirements of the Act in lodged financial reports. The Panel supported ASIC’s view on two of the matters, but supported the company’s adopted accounting treatment in the other two matters. These developments indicate the importance of directors and management thoroughly investigating and supporting contentious accounting treatments as part of the preparation of financial statements. For more information about the initial FRP reports, see FRP press release [first batch], FRP press release [second batch] and ASIC press release
  • A number of ASX Listing Rule amendments may impact this reporting period:
    • 11 January 2010 - amendments covering corporate governance, backdoor listings, quarterly reporting by mining entities, dividend announcements and other topics. For more information, refer to ASX Companies Update 01/10
    • 1 June 2010 - amendments covering investment entities, mining exploration entities, security purchase plans and other matters. For more information, refer to ASX Companies Update 06/10
    • [NEW] 17 December 2010 - a number of minor amendments, principally in relation to periodic financial reporting, come into effect. The amendments update references to Financial Reporting standards, update some references to ASIC Regulatory Guides, delete some obsolete references to time periods that have passed, and correct some minor typographical errors. For more information, refer to ASX Companies Update 12/10
    • [NEW] 1 January 2011 - new listing rules about the policies governing trading in a listed entity's securities by its directors and other key management personnel come into effect. At the same time, consequential amendments to the Appendix 3Y 'Change of Director's Interests Notice' come into effect. For more information, refer to ASX Companies Update 11/10
  • [NEW] The ASX has announced that listed entities who have been significantly affected by the recent flooding in Queensland and other States and who are likely to encounter difficulties in finalising their financial reports in time to meet their lodgement deadlines may be eligible for an extension of time to lodge periodic financial reports. For more information, refer to ASX Companies Update 01/11
  • On 30 June 2010, the ASX Corporate Governance Council released amendments to the 2nd edition of the Corporate Governance Principles and Recommendations in relation to diversity, remuneration, trading policies and briefings. The change in the reporting requirements for each of the amendments to the Principles and Recommendations will apply to an entity's first financial year commencing on or after 1 January 2011. For more information, refer to ASX Companies Update 08/10.


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