This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.

Bookmark Email Print page

What's new in the June 2010 financial reporting cycle


DOWNLOAD  

Note: The latest edition of this publication can be found at www.deloitte.com/au/WhatsNew.

The information on this page has been updated on for developments to 2 September 2010 - we will update this page if any significant developments occur in the period to 30 September 2010.

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 30 June 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 June 2010?

Economic climate

The June 2010 reporting season sees a very different economic environment to that facing entities 12 months ago. The threat of a deep Australian recession appears to have abated, growth has returned and the first signs of a global recovery have emerged. However, the threat of further shocks cannot be discounted and a number of conflicting indicators reveal the uncertainty lying ahead.

Add to this another level of uncertainty in terms of tax and legislative reform, global glacial moves towards putting a price on carbon (with Australia’s own attempts currently in a stalemate), an uncertain election cycle, and other developments. The commercial and practical challenges facing companies in this reporting season are immense.

From a financial reporting perspective, IFRS is volatile beast - effectively designed to reflect the underlying volatility in prices, values and other variables in financial statements. Accordingly, this current reporting period presents yet another ‘unique challenge’ in bringing all these competing factors together to produce a set of financial statements reflecting economic realities, market expectations and operating conditions.

One of the key financial reporting areas this volatility will impact is impairment, including the possibility of potentially reversing impairment losses in some cases - a mandatory and not optional reversal (except for goodwill and financial instruments). Entities may need to:

  • Revisit underlying cash flow forecasts in light of potentially improving conditions
  • Consider the effect of changes in interest rates and risk margins
  • Incorporate the effects of ongoing uncertainty over proposed legal and regulatory changes, such as tax changes resulting from the Henry Review and, longer term, a possible emissions trading or other scheme to reduce Australia's carbon emissions.

In addition, a wide range of other impacts might need to be considered – from going concern to fair value determination to more specific issues such as the impact on earnings per share calculations of discounted capital raisings and improved share prices potentially bringing options into the money.

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


A new look for financial statements

Full-year financial statements for June 2010 will look very different to those from previous years, due to the implementation of raft of reforms and changes – from both an Australian and global perspective.

The headline changes introduced for the first time include:

  • Primary financial statements – new titles, formats and layouts means a different look to the ‘front’ section of the financial statements. Key changes include the mandatory introduction of a statement of comprehensive income and statement of changes in equity, voluntary renaming of the income statement, balance sheet and cash flows statement and the requirement for a ‘third balance sheet’ in some cases. See our Model financial statements for examples
  • Mergers and acquisitions – new requirements for accounting for business combinations will generally result in more profit volatility due to changes such as expensing of transaction costs, more prescriptive guidance on ‘separate accounting’ for share-based payments and pre-existing relationships, contingent consideration such as earn outs being treated as financial instruments, new guidance on changes in ownership interests. Read more in Accounting alert 2008/01
  • Segment reporting – a new ‘through the eyes of management’ approach to the disclosure of segment information. Implementation of equivalent requirements in the United States was met with significant interest and investigation by the regulator and a similar outcome may result under IFRS
  • 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. More information (including an illustrative example of parent entity disclosures) can be found in Accounting alert 2010/08
  • 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 . More information (including an illustrative declaration) can be found in Accounting alert 2010/08
  • 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. Read more 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.

The changes to the Corporations Act 2001 and associated regulations have been finalised and so are in force. The Corporations Act 2001 amendments were passed by the House of Representatives on 21 June 2010 and the Senate on 24 June 2010, and received Royal Assent on 28 June 2010. In addition, The AASB has released AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements to implement its revised differential reporting regime. These Standards were made by the AASB out of session on 30 June 2010 and mandatorily apply to annual financial reporting periods beginning on or after 1 July 2013. Early adoption is permitted to annual reporting periods beginning on or after 1 July 2009 (and so can generally be applied in financial statements at 30 June 2010). More information is available in Accounting alert 2010/08.

Other considerations

The key considerations for June 2010 include:

  • 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). More information is available in Accounting alert 2010/08
  • Other 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 are expected during 2010. Careful consideration of these impacts now can avoid challenges and maximise opportunities going forward, e.g. lease accounting (consider in lease negotiations), tax accounting (uncertainty in current year's tax returns), revenue recognition (impact on current accounting policies). More information can be found in our IFRS resources
  • 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, Federal Government's Henry Tax Review response and 2010 Federal Budget measures. 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

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 June 2010?

The tables below outline the new and revised pronouncements that are to be applied for the first time at 30 June 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 30 June 2010 applicability More information
Full years Half years

AASB 101 Presentation of Financial Statements (September 2007), AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

The main changes from the previous version of AASB 101 are to require that an entity must:

  • Present all non-owner changes in equity ('comprehensive income') either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income)
  • Present an additional statement of financial position (balance sheet) as at the beginning of the earliest comparative period when the entity applies an accounting policy retrospectively, makes a retrospective restatement, or reclassifies items in its financial statements (this would generally mean that three balance sheets are presented in these circumstances)
  • Disclose income tax relating to each component of other comprehensive income
  • Disclose reclassification adjustments relating to components of other comprehensive income.

AASB 101 amends the titles of financial statements as follows (these changes are not mandatory):

  • 'Balance sheet' will become 'statement of financial position'
  • 'Income statement' will become part of the 'statement of comprehensive income', unless a separate income statement is presented
  • 'Cash flow statement' will become 'statement of cash flows'.

Note: The AASB has also released a revised version of AASB 1039 'Concise Financial Reports' to ensure consistency with this Standard. AASB 1049 has also been amended by AASB 2008-9 to achieve consistency with this version of AASB 101. See Domestic Standards below for more details.

Applies to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2007/16
IAS Plus Newsletter (PDF 119kb)

AASB 123 Borrowing Costs (June 2007), AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123

AASB 123 is equivalent to IAS 23 of the same name and eliminates the option of expensing borrowing costs related to qualifying assets, instead requiring capitalisation.

Transitional provisions require prospective application to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after the application date. However, an entity may designate any date before the application date and apply the Standard to borrowing costs relating to all qualifying assets for which the commencement date for capitalisation is on or after that date. The Amending Standard eliminates reference to the expensing option in various other pronouncements.

Note: See also AASB 2009-1 'Amendments to Australian Accounting Standards - Borrowing Costs of Not-for-Profit Public Sector Entities'.

Annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2007/10
IAS Plus Newsletter (PDF 99kb)

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).

Note: An entity early adopting AASB 3(2008) must also apply the consequential amendments to AASB 2, AASB 138 and Interpretation 9 included in AASB 2009-4.

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

AASB 8 Operating Segments, AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8

AASB 8 replaces AASB 114 Segment Reporting and introduces a new 'management approach' to segment reporting to more closely align IFRS with US-GAAP.

Unlike AASB 114, AASB 8 only applies to entities which have on issue any debt or equity securities that are traded in a public market (or which are in the process of issuing any class of instruments in a public market). However, the requirements in AASB 136 Impairment of Assets regarding the testing of goodwill by reference to an upper limit of a segment identified under AASB 8 apply to all entities.

The AASB has released a revised version of AASB 1039 'Concise Financial Reports' to ensure consistency with this Standard. See Domestic Standards below for more details.

Applies to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented IAS Plus Newsletter (PDF 113kb)
Accounting alert 2007/04

AASB 9 Financial Instruments, 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.
Applies on a modified retrospective basis to annual periods beginning on or after 1 January 2013 Optional Optional IAS Plus Update Newsletter (PDF 226kb)
Deloitte Australia press release

 

New or revised domestic Standards
New or revised requirement When effective 30 June 2010 applicability More information
Full years Half years

AASB 1039 Concise Financial Reports (revised)

Revised AASB 1039 that incorporates changes in terminology and descriptions of the financial statements to achieve consistency with AASB 101 Presentation of Financial Statements (September 2007) and updates the segment disclosure requirements to be consistent with AASB 8 Operating Segments.

Applies to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2008/11

[NEW] 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 Interpretations below) Mandatory (refer to Interpretations below) See the related Interpretations below

[NEW] 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. 'Stage 2' of the AASB's differential reporting project will consider whether to extend these arrangements 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

 

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 30 June 2010 applicability More information
Full years Half years

AASB 2007-10 Further Amendments to Australian Accounting Standards arising from AASB 101

This Amending Standard changes the term 'general purpose financial report' to 'general purpose financial statements' and the term 'financial report' to 'financial statements', where relevant, in Australian Accounting Standards (including Interpretations) to better align with IFRS terminology.

Applies to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2007/20

AASB 2008-1 Amendments to Australian Accounting Standard - Share-based Payments: Vesting Conditions and Cancellations

Amends AASB 2 Share-based Payment to introduce equivalent amendments made to IFRS 2 Share-based Payment by the IASB to:

  • Clarify that vesting conditions are those conditions that determine whether the entity receives the services that result in the counterparty's entitlement
  • Restrict the definition of vesting conditions to include only service conditions and performance conditions
  • Amend the definition of performance conditions to require the completion of a service period in addition to specified performance targets
  • Specify that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment.
Applies retrospectively to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2008/02
IAS Plus Newsletter (PDF 126kb)

AASB 2008-2 Amendments to Australian Accounting Standards - Puttable Financial Instruments and Obligations arising on Liquidation

Amends AASB 132 Financial Instruments: Presentation and AASB 101 Presentation of Financial Statements and a number of other standards to introduce requirements equivalent to the IASB's amendments regarding puttable financial instruments and obligations arising on liquidation.

The amendments permit certain puttable financial instruments and instruments (or components of instruments) that impose on the entity an obligation to deliver to another party a pro-rata share of the net assets of the entity only on liquidation, to be classified as equity, subject to specified criteria being met.

Applies retrospectively to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2008/03
IAS Plus Newsletter(PDF 101kb)

AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project

Makes amendments to 25 different Standards and is equivalent to the IASB Standard Improvements to IFRSs issued in May 2008. The amendments largely clarify the required accounting treatment where previous practice had varied, although some new or changed requirements are introduced. Topics include below market interest-rate government loans, accounting for advertising and promotional expenditure, investment property under construction and the reclassification to inventories of property, plant and equipment previously held for rental when the assets cease to be rented and are held for sale.

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

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

Makes amendments to Australian Accounting Standards 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.

Note: The amendments cannot be early adopted for annual reporting periods beginning before 1 July 2009 unless AASB 127 'Consolidated and Separate Financial Statements' (as amended by AASB 2008-5 in July 2008) is also applied.

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

AASB 2008-7 Amendments to Australian Accounting Standards - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

This Amending Standard:

  • Amends AASB 127 Consolidated and Separate Financial Statements to remove the definition of the 'cost method' and to require the separate financial statements of a new parent formed as the result of a specific type of reorganisation to measure the cost of its investment in the previous parent at the carrying amount of its share of the equity items of the previous parent at the date of the reorganisation
  • Removes from AASB 118 Revenue the requirement to deduct dividends declared out of pre-acquisition profits from the cost of an investment in a subsidiary, jointly controlled entity or associate accounted for under the cost method. Therefore, all dividends from a subsidiary, jointly controlled entity or associate are recognised by the investor as income
  • Implements consequential amendments to AASB 136 Impairment of Assets, introducing a new indicator of impairment for investments in subsidiaries, jointly controlled entities and associates where a dividend has been recognised
  • Allows first-time adopters to use a deemed cost of either fair value or the carrying amount under previous GAAP to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements.
Applies prospectively for annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented Accounting alert 2008/09
IAS Plus Newsletter (PDF 102kb)
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 Mandatory IAS Plus Newsletter (PDF 140kb)
IAS Plus project page

AASB 2008-9 Amendments to AASB 1049 for consistency with AASB 101

Amends AASB 1049 Whole of Government and General Government Sector Financial Reporting to reflect the revised requirements in AASB 101 (September 2007), including presenting a whole of government and GGS statement of changes in equity, and using AASB 101 terminology. Also clarifies the government operating statement requirements and the budgeted information disclosure requirements.

Applies to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented IAS Plus Newsletter (PDF 140kb)
IAS Plus project page

AASB 2009-1 Amendments to Australian Accounting Standards - Borrowing Costs of Not-for-Profit Public Sector Entities

Amends AASB 123 Borrowing Costs to reintroduce the option to allow public sector not-for-profit entities to expense all borrowing costs.

Applies to annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009 Mandatory Already implemented Accounting alert 2009/05

AASB 2009-2 Amendments to Australian Accounting Standards - Improving Disclosures about Financial Instruments

Amends AASB 7 Financial Instruments: Disclosures to require enhanced disclosures about fair value measurements and liquidity risk.

Among other things, the amendments:

  • Clarify that the existing AASB 7 fair value disclosures must be made separately for each class of financial instrument
  • Add disclosure of any change in the method for determining fair value and the reasons for the change
  • Establish a three-level hierarchy for making fair value measurements used in the disclosures
  • Clarify that the current maturity analysis for non-derivative financial instruments should include issued financial guarantee contracts and disclosure of a maturity analysis for derivative financial liabilities.

Comparative information is not required to be provided in the first year the amendments are applied.

Applies to annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009 Mandatory Already implemented IAS Plus Update Newsletter (PDF 115kb)
IASB Press Release

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.

Note: An entity early adopting AASB 3(2008) must also apply the consequential amendments to AASB 2, AASB 138 and Interpretation 9 included in AASB 2009-4.

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

AASB 2009-6 Amendments to Australian Accounting Standards and Erratum General Terminology Changes (October 2009)

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. The Standard also makes additional amendments as a consequence of the issuance in September 2007 of a revised AASB 101. The Erratum makes a number of additional terminology-related and editorial changes.

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

Applies to annual reporting periods beginning on or after 1 January 2009 that end on or after 30 June 2009 Mandatory Already implemented Accounting alert 2009/07

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 Mandatory 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 Optional 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
(Optional 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 Optional 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
(Optional for first-time adopters)
IAS Plus Update Newsletter (PDF 79kb)

[NEW] 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)
Optional
(see note regarding early adoption)
IAS Plus Update Newsletter (PDF 77kb)

[NEW] 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)

 

New and revised Interpretations
New or revised requirement When effective 30 June 2010 applicability More information
Full years Half years

Interpretation 15 Agreements for the Construction of Real Estate

Addresses the accounting for revenue and associated expenses by entities that undertake the construction of real estate directly or through subcontractors, specifically two (related) issues:

  • Determining whether an agreement for the construction of real estate is within the scope of AASB 111 Construction Contracts or AASB 118 Revenue
  • When revenue from the construction of real estate should be recognised.
Applies retrospectively to annual reporting periods beginning on or after 1 January 2009 Mandatory Already implemented IAS Plus Newsletter (PDF 133kb)
IAS Plus project page

Interpretation 16 Hedges of a Net Investment in a Foreign Operation

Provides guidance on net investment hedging, including:

  • Which foreign currency risks qualify for hedge accounting, and what amount can be designated
  • Where within the group the hedging instrument can be held
  • What amount should be reclassified to profit or loss when the hedged foreign operation is disposed of.

Note: AASB 2009-4 amends this Interpretation to remove restrictions on the entity that can hold hedging instruments in the hedge relationship.

Applies prospectively to annual reporting periods beginning on or after 1 October 2008 Mandatory Already implemented IAS Plus Newsletter (PDF 122kb)
IAS Plus project page

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.

Note: an entity early adopting Interpretation 17 must also apply AASB 3(2008), AASB 127(2008) and AASB 5 (as amended by AASB 2008-13).

Applies prospectively to annual reporting periods beginning on or after 1 July 2009 Mandatory
(see note regarding early adoption)
Mandatory IAS Plus 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.

Note: Earlier application of Interpretation 18 is permitted provided the valuations and other information needed to apply the Interpretation to past transfers were obtained at the time those transfers occurred.

Applies to transfers of assets from customers received on or after 1 July 2009 Mandatory for all transfers received after 1 July 2009
(see note regarding early adoption)
Mandatory for all transfers received after 1 July 2009
(see note regarding early adoption)
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 Optional 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 30 June 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

[NEW] Improvements to IFRSs (2010)

Amends seven pronouncements (plus consequential amendments to various others) as a result of the IASB's 2008-2010 cycle of annual improvements.

Key amendments include:

  • IFRS 3/IAS 27 - clarification of transition requirements, measurement of non-controlling interests, unreplaced and voluntarily replaced share-based payment awards
  • Financial statement disclosures - clarification of content of statement of changes in equity (IAS 1), financial instrument disclosures (IFRS 7) and significant events and transactions in interim reports (IAS 34)
  • IFRIC 13 - fair value of award credits
  • IFRS 1 - accounting policy changes in year of adoption and amendments to deemed cost (revaluation basis, regulatory assets).

[UPDATE] Note: The AASB publicly released AASB 2010-3 'Amendments to Australian Accounting Standards arising from the Annual Improvements Project' and AASB 2010-4 'Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project', in early July 2010 (the Standards were made out of session on 23 June 2010).

Generally effective for annual reporting periods beginning on or after 1 January 2011
(IFRS 3/IAS 27 transition clarifications 1 July 2010)
Optional Optional IAS Plus Update Newsletter (PDF 77kb)

 

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

[NEW/UPDATED] 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 will be 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 will more easily be able to change their financial year (without applying 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 Regulatory Guide 43 Financial reports and audit relief

ASIC has reissued this regulatory guide (also known as Policy Statement 43) based on legislation and regulations as at 9 October 2008. The guide explains how ASIC may exercise its powers to grant relief from the financial reporting and audit requirements of Pt 2M.2, 2M.3 and 2M.4 (other than Div 4) of the Corporations Act 2001.

Reissued and updated 9 October 2008 -

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

[NEW] 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

[NEW] 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

 

Other developments

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

  • [NEW] ASIC released its focus areas for June 2010 financial reporting on Monday 5 July 2010. Key suggested focus areas include going concern, impairment, fair value measurements, non-statutory profits, segment reporting, business combinations and various other focus areas. The focus areas are similar to prior periods, with added emphasis on non-statutory profits. The 5 July ASIC media release is available from the ASIC website. In relation to non-statutory profits, see also our related press release 'Use of underlying profit leaps post GFC'
  • A number of ASX Listing Rule amendments have come into effect:
    • 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
  • In mid-March 2009, guidance was issued by The Australian Institute of Company Directors (AICD) and Financial Services Institute of Australia (Finsia) in relation to 'non-statutory profit' disclosures to the market. Concern had been raised about widespread use of different 'non-statutory profit' disclosures, which nonetheless can be valuable information for users of financial information disclosed to the market. The AICD and Finsia guidance seeks to encourage companies to disclose any non-statutory measure of profit in a responsible and consistent manner. The press release is available by clicking here. See also our related press release 'Use of underlying profit leaps post GFC'. Key aspects of the guidance include:
    • The recommendation that any non-statutory measure of profit disclosed be termed 'underlying profit'
    • The establishment of seven principles to reporting underlying profit, including a principle that 'underlying profit' be reconciled to net profit after tax (NPAT) included in statutory financial reports
    • Examples of the common items that adjust NPAT to arrive at underlying profit
    • A suggestion that companies following the guidance should disclose that fact.


Top  

Share

 
Follow us



 

Talk to us