• Australia is included in the IFAD GAAP Convergence Studies
• National Professional Organisation Website: CPA Australia
• National Professional Organisation Website: Institute of Chartered Accountants in Australia
• National Professional Organisation Website: National Institute of Accountants
• Standard-Setter Website: Australian Accounting Standards Board (AASB)
• Response to IFAC Member Body Survey on Standard Setting and Regulation
• Participant in the Asian-Oceanian Standard-Setters Group (AOSSG)

Updates

Melbourne:

Sydney:

Reporting entities must comply with Australian Accounting Standards and Interpretations, as issued by the Australian Accounting Standards Board (AASB), and with the requirements of Corporations Act 2001. A reporting entity is 'an entity in respect of which it is reasonable to expect the existence of users who rely on the entity's general purpose financial statement for information that will be useful to them for making and evaluating decisions about the allocation of resources. A reporting entity can be a single entity or a group comprising a parent and all of its subsidiaries.'

The AASB is an agency of the Australian Government. AASB standards are known as Australian Accounting Standards and include Australian equivalents to International Financial Reporting Standards (A-IFRSs). When it first began adopting IFRSs as Australian Accounting Standards, the AASB made some modifications to IFRSs, including removing some options and adding some disclosures. In 2007, the AASB modified Australian Accounting Standards so that they are identical to IFRSs as issued by the IASB for for-profit entities. Some additional disclosures have been retained and some non-IFRS compliant requirements apply for not-for-profit and public sector entities.

The basis of preparation note to the financial statements defines the reporting framework as 'Australian Accounting Standards'[which include 'Australian equivalents to International Financial Reporting Standards' (A-IFRSs)]. That note goes on to say that compliance with A-IFRSs ensures the financial report of the entity also complies with International Financial Reporting Standards.

The auditor's opinion refers to compliance with A-IFRSs. The auditor's report also notes that 'in note xx, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report complies with International Financial Reporting Standards'. The audit opinion itself notes 'the financial report also complies with International Financial Reporting Standards as disclosed in Note xx'.

From 30 June 2010, the directors declaration accompanying the financial statements of companies and other entities regulated by the Corporations Act 2001 is required to include an additional statement referring to the explicit and unreserved statement of compliance with International Financial Reporting Standards in the notes to the financial statements (where such a statement is made).

New Australian resource tax raises accounting issues, prompts AASB to issue agenda decisions

The Australian Accounting Standards Board (AASB) has issued tentative agenda decisions dealing with accounting issues arising from a proposed 'Mineral Resource Rent Tax' (MRRT) and extension of 'Petroleum Resource Rent Tax' (PRRT) that are currently being considered by the Australian Parliament. The accounting treatment of MRRT/PRRT is a contentious issue in Australia and the tentative agenda decisions potentially have wider implications due to the generic nature of some of the matters discussed and the widespread involvement of global resources companies in the Australian resources industry, many of whom report under IFRSs or US GAAP.

The tentative agenda decisions deal with the following matters:

• Whether MRRT is an income tax. The agenda decision stops short of concluding MRRT is an income tax, but notes existing guidance is sufficient to address the issue, referencing the possible direct or analogous application of AASB Interpretation 1003 Australian Petroleum Resource Rent Tax (a domestic Interpretation)
• Accounting for an uplift in allowances on the commencement of a new tax. Entities becoming subject to the MRRT/PRRT for the first time are given the option of adopting an 'starting base allowance' which increases future deductions available based on the market value of the operation, rather than the actual cost of establishing the operation. The agenda decision states such increases in deductions available are to be treated "as a deductible temporary difference giving rise to a deferred tax asset"
• Substantive enactment. The Bills required to enact the tax have been passed by the Lower House of the Australian Parliament, but will not be considered by the Australian Senate until 2012. The tentative agenda decision concludes existing guidance (including a further Australian domestic Interpretation) "is sufficient to address the issue of when substantive enactment has occurred".

The tentative agenda decisions arose from the AASB's discussions at its December 2011 meeting, where the AASB also debated the question of accounting for payments to Australian State Governments for royalties that can be credited against MRRT/PRRT payable. There is currently debate about whether such royalties should be considered production costs or a form of 'prepaid' MRRT/PRRT and the AASB has indicated it will raise this additional issue with the IFRS Interpretations Committee.

Comments on the AASB's tentative agenda decisions close on 17 January 2012. Click for:

• AASB's tentative agenda decisions (link to AASB website)
• AASB Action Alert (link to AASB website) from the AASB's December meeting with more details of the discussion
• Deloitte (Australia) submission to AASB on accounting for MRRT/PRRT (PDF 74k), providing some additional background to the issues arising.
   

Australian half-year model financial statements for December 2011

Deloitte (Australia) has published its model financial statements for the half-years ending 31 December 2011.

Among the mandatory financial reporting requirements for the December 2011 half-year end, the amendments made to AASB 134 Interim Financial Reporting as a result of AASB 2010-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project is the noteworthy amendment that may result in disclosure changes in the 31 December 2011 half-year reports. These amendments emphases the disclosure principles in AASB 134 that disclosure is required of significant events and transactions and adds additional examples of events that would require disclosure.

The publication is organised in two sections:

• Section A – What’s new for financial reports at December 2011? This section of the publication summarises key changes and topical issues for consideration in preparation of half-year reports at 31 December 2011.
• Section B – Model half-year report. This section of the publication contains an illustrative half-year report for a fictional company, GAAP Holdings (Australia) Interim Limited. This section is fully book-marked to each main financial statement, and each note to the financial statements.

Click for Model Half-Year Report — Half-years ending on or after 31 December 2011 (PDF 1,196k).
 

Calls for Australia to drop 'domestic' Interpretations

A recent submission made by Deloitte (Australia) to the Australian Accounting Standards Board (AASB) asks the AASB to consider withdrawing Australian 'domestic' Interpretations.

The submission deals with accounting for the proposed Mineral Resource Rent Tax (MRRT) and extension of Petroleum Resource Rent Tax (PRRT) that are currently being considered by the Australian Parliament. Under the MRRT and PRRT, the Australian Government would seek to access a proportion of the 'economic rent' inherent in coal, iron ore and oil and gas operations. In response to diversity in practice that emerged on Australia's transition to IFRSs in accounting for the existing smaller scoped form of PRRT, the AASB issued Interpretation 1003 Australian Petroleum Resource Rent Tax, which requires PRRT to be accounted for as an income tax. The submission argues the Interpretation "effectively represents the elimination of accounting policy options under Australian Accounting Standards that are available to entities that report under International Financial Reporting Standards (IFRS) as promulgated by the IASB".

The submission notes the following on the efficacy of domestic Interpretations:

The submission also notes a number of significant accounting issues that arise in accounting for PRRT or MRRT as an income tax, arising from the unique features encompassed in a resource rent regime, such as the ability of affected entities to elect to use a measure of 'market value' in their tax calculations, the indexation ('augmentation') of unused allowances, and the proposed rebateability of royalties paid to Australian States.

Click for:

• Deloitte (Australia) submission to the AASB (PDF 74k)
• Extracting Value Issue 12 (PDF 939k), discussing accounting for MRRT and PRRT in more detail.
   

FRC releases minutes from 'Reducing Complexity' and 'Integrated Reporting' Taskforce meetings

The Australian Financial Reporting Council (FRC) has released minutes from the following taskforce meetings:

• Reducing Complexity Task Force meeting held on 22 July 2011. The minutes (link to FRC website) include:
  • introductory comments from members - including the possibility of 'quick wins' in respect of corporations law and other reporting requirements and the restrictions imposed by Australia's compliance with IFRS
  • the taskforce work program - the report on Phase 1 of the project and the taskforce's recommendations to the FRC are expected to be tabled at the FRC meeting scheduled for 9 March 2012
  • stakeholder feedback from accounting firms - no responses had been received
  • member views about complexity - topics discussed included issues with Australia's adoption of IFRSs, the complexity of global standard setting, the use of XBRL, assurance and other issues
  • a meeting with an academic, Prof Jayne Godfrey (Dean of the Australian National University College of Business and Economics) - it was noted one source of complexity is complex transactions, with sources of information about such reporting including: recognition, disclosures, intangibles, audit issues and taxation, and that literature tends to focus on sophisticated investors
• Integrated Reporting Taskforce 26 August 2011. The minutes (link to FRC website) include a summary of a discussion on what an integrated report would entail and its the key desirable features (unified report, with assurance, globally comparable, applying to publicly listed entities), and recommendations including that the FRC should take a lead in presenting Australian stakeholders' views regarding integrated reporting.
   

Outcomes from October AASB meeting

The Australian Accounting Standards Board (AASB) has released its Action Alert (link to AASB website) from its October meeting, held on 26 October 2011.

At this meeting the Board, amongst other things:

• discussed aspects of accounting for Australia's carbon tax - the AASB is restricting its discussion of the accounting to the fixed-price period, expected to be the first 3 years of the scheme, in the hope that the International Accounting Standards Board will develop guidance on accounting for emissions trading schemes before the flexible period comes into effect. The AASB confirmed that it does not expect to issue an Interpretation on the topic but confirmed that it saw merit in the AASB staff publishing a paper that draws out the relevant accounting issues (for more information, see the staff paper, link to the AASB website)
• progressed its project on Service Performance Reporting
• continued to monitor and form views on the core IASB projects/consultation documents – financial instruments, revenue recognition, leases and insurance contracts
• received progress reports on four of its domestic projects – superannuation entities; control in the not-for-profit sector, not-for-profit entities within the general government sector (ED 212) and extending related party disclosures to the not-for-profit public sector (ED 214)
• received reports relating to a range of other topics and organisations – an IPSASB Report, IASB Agenda Consultation, IFRS Advisory Council, IFRS Interpretations Committee, Integrated Reporting, and AOSSG.

The next AASB meeting is due to be held on 7-8 December 2011. Click for AASB Action Alert (link to AASB website).
 

AASB requests comments on proposed government loan amendments to IFRS 1

The Australian Accounting Standards Board (AASB) has issued Exposure Draft ED 221 Government Loans (proposed amendments to AASB 1 First-time Adoption of Australian Accounting Standards), ), which incorporates IASB ED/2011/5. The ED proposes to provide the same relief in relation to accounting for a government loan with a below-market rate of interest to first-time adopters of Australian Accounting Standards as is granted to existing preparers of financial statements when applying AASB 120 Accounting for Government Grants and Disclosure of Government Assistance.

More information about the proposals can be found in our IFRS in Focus Newsletter (PDF 58k) and our project page for the IFRS 1 amendment.

Comments on ED 221 are due to the AASB by 5 December 2011, with comments on ED/2011/5 due to the IASB by 5 January 2012. Click for AASB announcement (link to AASB website).
 

Australian standard setter warns about far-reaching impacts of the IASB's Investment Entities ED

Stevenson admits that this media release is an unusual step, but he feels it is warranted as this draft raises fundamental questions about existing requirements and may have far-reaching impacts.

The AASB has released the IASB's ED as AASB ED 220 in September. Stevenson urges constituents to carefully review the proposals and make their views known to the AASB and the IASB – to answer the question whether this proposed standard is in the interest of Australian reporting and of international reporting.

Comments are due to the AASB by the 30 November 2011 and to the IASB by 5 January 2012.

September FRC meeting

The Australian Financial Reporting Council (FRC) has released draft minutes from its 61st meeting, held on 7 September 2011.

Of interest are the following observations:

• ASIC paper on 'non-conforming financial information'. Mr Michael Dwyer (ASIC Commissioner) provided the meeting with a report on its consideration of submissions on Consultation Paper 150 Disclosing financial information other than in accordance with accounting standards. He indicated that ASIC is still in consultation with stakeholder groups. However, ASIC hopes to issue its guidance by the end of November 2011.
• Water accounting and auditing. The Water Accounting Standards Board has issued an Exposure Draft of Australian Water Accounting Standard 1 Preparation and Presentation of General Purpose Water Accounting Reports (ED AWAS 1) and an agreement has been made between the Water Accounting Standards Board (WASB) and the AUASB to work jointly on the development of an assurance standard for water accounting
• Mr McGregor, who retired as an Australian-based member of the IASB at the end of June 2011, made the following observations about his time as a member of the IASB and the role Australia can play in international standards-setting, including:
  • Australia is regarded as a thought leader on reporting by private sector for-profit companies and can provide good feedback on matters such as IFRS implementation
  • AOSSG is viewed as providing a valuable balance on IFRS issues to the views of the US and Europe
  • as no IASB member is now resident in Australia, Australia needs to give consideration to how to maintain or achieve a greater IASB presence in Australia
  • there continues to be a misconception (especially in Europe) that Australia is not fully compliant with IFRS, at least partly as a result of the decision to use the designation Australian Accounting Standards for what are essentially IFRS. As a consequence, Australia is not getting full value out of our decision to adopt IFRS
  • in the area of public sector reporting, Australia and New Zealand are world leaders. It would be a logical extension to the standards-setting arrangement s for the IPSASB to come under the umbrella of the IFRS Foundation. The FRC and XRB need to press this issue with the Trustees of the IFRS Foundation.

The next meeting of the FRC will be held in Melbourne on Wednesday, 14 December 2011. Click for the full draft FRC minutes (link to FRC website).
 

ASX Companies Update issued

The Australian Securities Exchange (ASX) has issued Update 07/11, covering the following topics (among others):

• Australian Council of Human Rights Agencies (ACHRA) Guidance on Diversity - discusses the diversity-related amendments made in July 2010 to the ASX Corporate Governance Principles and Recommendations and resources available to meet the new reporting obligations
• Proposed new Listing Rules - the ASX is proposing to amend the Listing Rules with effect from 1 January 2012 to introduce a 'good fame and character' requirement for directors of new listed entities.
• New ASIC Market Integrity Rules - impacts of new ASIC Market Integrity Rules which come into effect On 31 October 2011
• Company Announcements Office (CAO) matters - reminders regarding the start of daylight savings, and the lodgement of Chairperson's addresses and periodic reports
• Improving the capture of information - the ASX is in the early stages of developing a "straight through" electronic solution for distribution of information between listed entities and the information user.

Click for ASX Update 07/11 (link to ASX website).
 

AASB updates complied pronouncements for early RDR adoption

The Australian Accounting Standards Board (AASB) has announced the 2010/11 'Reduced Disclosure Requirements' (RDR) versions of Standards and Interpretations that apply to that financial year.

The revised Australian differential reporting system is scheduled to commence from 1 July 2013 and will allow eligible 'Tier 2' entities (in relation to for-profit entities, essentially those entities without public accountability) to avoid a number of presentation and disclosure, but not recognition and measurement, requirements of Australian Accounting Standards. The RDR versions of pronouncements illustrate the requirements that can be avoided through the use of shading.

Compiled Standards and Interpretations including RDR disclosure exemptions are prepared annually by the AASB for financial years ending 30 June. Entities applying the RDR before the mandatory application date can use the compiled pronouncements to apply the RDR using versions of pronouncements that clearly show the applicable requirements for the year.

Click for AASB announcement (link to AASB website). Deloitte Australia also publishes Reduced Disclosure Requirements - Model Financial Statements (PDF 914k).
 

Australian superannuation reform include proposals for mandatory use of XBRL

The Australian Government has released proposals for the reform of the Australian superannuation system, which include a proposal for mandatory Standard Business Reporting (SBR) using eXtensible Business Reporting Language (XBRL)

The Australian Government's Super System Review recommended the development of standardised forms and common data standards to support electronic transactions for superannuation. It also recommended that these standards should be compatible with the existing Australian SBR framework and provide for linked personal and financial data transmission.

SBR will be used as the platform to develop the taxonomy and message structures for superannuation transactions, along with the use of eXtensible Business Reporting Language (XBRL) for exchanging information.

It is proposed that data standards will be published and available for use by funds (on a voluntary uptake basis) early in 2012. The data standards and use of e-commerce would then become mandatory for funds regulated by the Australian Prudential Regulation Authority (APRA) and self managed superannuation funds (SMSFs) for processing rollovers and accepting contributions from July 2013. Smaller funds and employers would adopt later, subject to consultation.

Click for press announcement (link to Australian Treasury website).
 

ASIC updates its guidance on schemes of arrangement

The Australian Securities and Investments Commission (ASIC) has issued revised Regulatory Guide RG 60 Schemes of Arrangement.

RG 60 is a guide for companies and their advisers involved in, or affected by, schemes of arrangement between a company and its members under Pt 5.1 of the Corporations Act 2001.

In light of the submissions ASIC received, ASIC did not adopt the original proposal, but instead updated RG 60 to outline how ASIC will consider objectives to scheme proposals. The guide also notes ASIC will closely consider schemes that offer collateral benefits and/or unequal consideration and will examine schemes that result in a reverse takeover on a case-by-case basis.

Click for ASIC announcement (link to ASIC website).
 

AASB issues investment entity exposure draft

The Australian Accounting Standards Board (AASB) has issued ED 220 Investment Entities which incorporates the IASB's Exposure Draft ED/2011/4 Investment Entities.

The proposals outline criteria for identifying an 'investment entity' and how such an entity would measure its investments. More information about the proposals can be found in our IFRS in Focus Newsletter (PDF 88k).

The Exposure Draft notes the AASB has significant concerns with the proposals in IASB ED/2011/4. In particular, the AASB is concerned about the absence of a conceptual underpinning for the proposals and their rules-based nature. In addition, the AASB notes the proposals would, for example, be likely to prevent the application by insurers of fair value through profit or loss measurement to their investees under AASB 1023 General Insurance Contracts and AASB 1023 Life Insurance Contracts.

The Exposure Draft also notes the nature of the proposed disclosures in ED/2011/4 and the AASB believes, in the context of the overall project, that it would not be appropriate to reduce those disclosures in respect of general purpose financial statements of Tier 2 entities applying 'Reduced Disclosure Requirements' (RDR). The AASB is therefore not proposing any relief from the disclosure requirements outlined in IASB ED/2010/4.

Comments are due to the AASB by the 30 November 2011 and to the IASB by 5 January 2012. Click for AASB announcement (link to AASB website).
 

Outcomes from September AASB meeting

The Australian Accounting Standards Board (AASB) has released its Action Alert (link to AASB website) from its September meeting, held on 7-8 September 2011.

At this meeting the Board, amongst other things:

• progressed its 'Income of Not-for-profit Entities (NFPs)' and 'Service Concession Arrangements – Grantors' projects
• considered a submission on its public sector work program and received a report on the NFP symposiums that were held in August
• held preliminary discussions about the accounting implications of a carbon tax and MRRT:
  • the AASB discussed accounting for the 'fixed price' component of the Federal Government's proposed carbon tax and will consider an issues paper at a future meeting discussing in more detail the various accounting issues for both the emitter and the government, including possible treatments of permits and obligations arising from emissions
  • The AASB had an education session on accounting for the proposed Mineral Resource Rent Tax (MRRT) and will discuss the topic again at the February 2012 meeting
• continued to monitor and form views on a range of IASB projects/consultation documents
• received progress reports on its domestic project on Superannuation Entities (a revised exposure draft is expected to be available for issue in October 2011)
• received an update on progress of the differential reporting research project (a precursor to the possible elimination of the reporting entity concept from Australian Accounting Standards) - research is continuing
• discussed the results of preliminary research into reducing complexity in financial reporting
• received reports relating to AOSSG and NZASB

The next AASB meeting is due to be held on 26-27 October 2011. Click for AASB Action Alert (link to AASB website).
 

AASB issues standards on comprehensive income and post-employment benefits, proposes related RDR disclosures

The Australian Accounting Standards Board (AASB) has issued the following pronouncements:

AASB issues new fair value measurement standards

The Australian Accounting Standards Board (AASB) has issued AASB 13 Fair Value Measurement and related AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13.

AASB 13 and AASB 2011-8 together are equivalent to IFRS 13 Fair Value Measurement issued by the IASB in May 2011. AASB 13 brings together, in a single source, guidance for all fair value measurements required in other Standards, providing a clear definition of fair value, a framework for measuring fair value and requires enhanced disclosures about fair value measurement.

Disclosure requirements under Tier 2 ('Reduced Disclosure Requirements', or 'RDR') will be determined through a separate due process with amendments being made subsequently to the Standards as required.

The Standards apply to annual reporting periods beginning on or after 1 January 2013, but may be applied to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013.

Click for:

• AASB announcement (link to AASB website)
• Our summary of IFRS 13 Fair Value Measurement
• IFRS in Focus Newsletter (PDF 78k)
• Podcast on IFRS 13 (18 mins, 13 mb).

Australian court case sheds light on directors' responsibilities for compliance with Accounting Standards

The Federal Court of Australia has handed down penalty orders in a case involving financial reporting issues (the 'Centro case'). The penalty orders follow on from an earlier decision on 27 June 2011 where the Court found directors had breached their duties when they signed off on financial reports that failed to disclose significant matters.

The Centro case includes allegations brought by the Australian Investments and Securities Commission (ASIC) over two financial reporting matters: the classification of liabilities (between current and non-current) and the disclosure of guarantees given.

Under the Australian Corporations Act 2001, financial statements are required to comply with Australian Accounting Standards (equivalent to IFRSs) and directors are required to approve the financial statements. Accordingly, non-compliance with Accounting Standards or the approval processes is a contravention of the law. In the most recent judgement, the Court refused the directors' applications to be exonerated from their contraventions and made declarations that all directors and the Chief Financial Officer contravened the law.

The Centro case considered the obligations of directors in relation to Australian financial reporting, including the extent to which directors can rely on management and external advisers, the degree of financial literacy required of directors, and the approval process for financial statements. It has been the matter of considerable debate in Australia.

Click for ASIC announcement (link to ASIC website).
 

ASX Companies Update issued

The Australian Securities Exchange (ASX) has issued Update 06/11, covering the following topics (among others):

• Exposure draft of Listing Rules amendments - following an earlier consultation, a final Exposure Draft of amendments and timetables for accelerated pro rata rights issues and changes to terminology regarding issue of securities has been released and is available on ASX's website (comments close on 9 September 2011)
• Annual General Meeting season - reminders about ASX review of draft notices of AGM (particularly allowing sufficient time for review where there are complex transactions or many resolutions) and how entities can comply new rules on the voting by chairpersons of undirected proxies in relation to resolutions on the remuneration report (see our earlier story).

Click for ASX Update 06/11 (link to ASX website).
 

AASB issues 'RDR' proposals for AASB 12 and AASB 127

The AASB has issued ED 216 AASB 12 Disclosure of Interests in Other Entities: Tier 2 Proposals and ED 217 AASB 127 Separate Financial Statements: Tier 2 Proposals, which set out the disclosures in AASB 12 and AASB 127 from which it is proposed entities applying Tier 2 'Reduced Disclosure Requirements' (RDR) should be exempt. An analysis of ED 216 and an analysis of ED 217 in relation to the proposed reduced disclosure requirements are available on the AASB website.

The proposals follow on from the release of six new Standards on 31 August 2011, implementing in Australia equivalent requirements to the suite of five standards issued by the IASB in May 2011.

Comments are due to the AASB by 30 November 2011. Click for AASB announcement (link to AASB website).
 

AASB issues new standards on consolidation, joint arrangements and disclosures

The Australian Accounting Standards Board (AASB) has issued six new Standards which introduce new requirements for consolidated financial statements, joint arrangements and disclosures.

The new standards, which are equivalent to the suite of five standards issued by the IASB in May 2011, are:

The Standards apply to annual reporting periods beginning on or after 1 January 2013. Earlier application is permitted by for-profit entities, but not by not-for-profit entities, for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013. Prior to 1 January 2013, the AASB will consider whether the Standards should be modified for application by not-for-profit entities. Furthermore, through a separate due process, the AASB will consider the relief from certain disclosure requirements that should be provided to entities that adopt Tier 2 'Reduced Disclosure Requirements' (RDR) (see our later story).

Australian for-profit entities should consider disclosing the information required by paragraph 30 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (where material) in relation to these Standards and should use the new citation (i.e. referring to the AASB pronouncements, not the IASB pronouncements on which they are based) from the date of their issue. The standards are dated 29 August 2011 and were publicly released late on 31 August 2011.

Click for AASB announcement (link to AASB website).
 

Australia to host third annual AOSSG meeting

The third annual meeting of the Asian-Oceanian Standard-Setters Group (AOSSG) is to be held in Melbourne on 23 and 24 November 2011.

IASB Chairman, Hans Hoogervorst and IASB members from the Asia and Oceanian region will attend, along with National Standard Setters from throughout the region.

The tentative agenda for the meeting indicates the meeting will consider a range of topics, including a 'vision paper', IASB projects such as financial instruments, revenue, leases and insurance contracts, and other topics such as Islamic finance and agriculture (see related discussions from the March 2011 NSS meeting).

Click for more information about the meeting (link to AOSSG website).
 

Referral of corporations powers locked in for a further five years

David Bradbury MP, Parliamentary Secretary to the Treasurer and Chairman of the Ministerial Council for Corporations, has announced the further extension of the referral of corporations power from the Australian states to the Commonwealth.

The referral of corporations powers underwrites the Australian Federal Government's ability to enact national laws dealing with corporations, in particular the Corporations Act 2011, which contains financial reporting requirements for entities with which it deals. Australian Accounting Standards (which are equivalent to International Financial Reporting Standards) are given the force of law by s.296 of the Corporations Act.

The current arrangements commenced in 2006 and the new agreement extends them to 2016.

Click for Australian Government press release (link to Australian Treasury website).
 

AASB seeks user perspective on improvements to IFRS 3 and IAS 38

The Australian Accounting Standards Board (AASB) has launched a survey of users of financial statements on the initial accounting for intangible assets acquired in business combinations under IFRS 3 Business Combinations and IAS 38 Intangible Assets (or similar GAAP).

The IASB considered a project proposal on intangible assets at its December 2007 joint meeting. The IASB decided that although a project on intangible assets was not urgent, it was an important project that should remain on the research agenda and asked the IASB staff to discuss the future of the project 'offline' with AASB staff and other national standard setters. In addition, the IASB Chairman at that time suggested that the research continue under the aegis of the National Standard Setters (NSS) group, with the IASB being involved through its usual representation as part of this group.

The survey of financial statements users follows on from a similar survey of preparers, advisors, auditors and regulators launched earlier this year and a separate Discussion Paper on intangible assets released in November 2008.

The survey is open until 15 December 2011. Click for access to the AASB survey (link to external website). More information is available in this AASB press release (link to AASB website).
 

Financial reporting considerations of Australia's proposed carbon price

Deloitte (Australia) has published Australia's carbon price — June 2011 financial reporting implications (PDF 1123k). The possibility of Australia implementing a carbon pricing mechanism has increased with the release of the Federal Government's proposals. The proposals are backed by the members of the 'Multi-Party Climate Change Committee' (MPCCC), which may imply, but not necessarily guarantee, the legislation may pass both Houses of Parliament in the months ahead. An exposure draft of the legislation to enact the carbon pricing mechanism was released by the Federal Treasurer on 28 July 2011, and is open for comment until 22 August 2011 before being expected to be tabled in Parliament in early Spring. Given these developments, the key question for companies is what the carbon pricing mechanism announcement means for the current June 2011 financial reporting cycle. The publication sets out some of the considerations of the carbon pricing mechanism for entities as they finalise their June reporting. Click for Australia's carbon price — June 2011 financial reporting implications (PDF 1123k).

ASIC clarifies voting on remuneration reports

The Australian Securities and Investments Commission (ASIC) has released an Information Sheet on the new provisions in the Corporations Act 2001 dealing with remuneration report resolutions.

The new rules govern when chairpersons at annual general meetings (AGM) can cast proxies on remuneration report resolutions. Under the new rules introduced by the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Act 2011, there is some uncertainty about the circumstances in which a shareholder can appoint a chairperson who is member of the company's key management personnel (which includes a director) to vote as their proxy in a non-binding vote to approve the remuneration report.

During 2011, the government proposes to amend the provisions to make it clear that chairpersons are permitted to vote undirected proxies on remuneration report resolutions (see Government press release, link to Australian Treasury website). Until the rules are amended to give effect to the government's intention, ASIC's information sheet provides options for companies to consider when complying with the current rules.

Click for ASIC Information Sheet 144 Annual general meetings: Voting on the remuneration report resolution (link to ASIC website).
 

AASB requests comments on the effective date of IFRS 9

The Australian Accounting Standards Board (AASB) has issued Exposure Draft ED 215 Mandatory Effective Date of IFRS 9, incorporating IASB ED/2011/3. ED 215 proposes amendments to AASB 9 Financial Instruments, issued in December 2009 and December 2010, to propose changing the mandatory effective date to annual periods beginning on or after 1 January 2015, rather than annual periods beginning on or after 1 January 2013. Early application of both would continue to be permitted.

More information about the proposals can be found in our Financial Instruments – Effective Date of IFRS 9 page.

Comments on ED 215 are due to the AASB by 7 October 2011 , with comments to the IASB on its exposure draft closing on 21 October 2011. Click for AASB announcement (link to AASB website).
 

AASB calls for comments on IASB's Agenda Consultation 2011

The Australian Accounting Standards Board (AASB) has issued ITC 25 Request for Comment on IASB Request for Views on Agenda Consultation 2011.

In light of the AASB's policy of incorporating International Financial Reporting Standards (IFRSs) into Australian Accounting Standards, the AASB is inviting comments on any of the questions in the IASB's Request for Views.

More information about the IASB's Agenda Consultation 2011 can be found in IFRS in Focus — IASB issues request for views on agenda consultation (PDF 67k) and our Agenda Consultation 2011 page.

Comments on ITC 25 are due to the AASB by 10 November 2011, with comments to the IASB on its Request for Views closing on 30 November 2011. Click for AASB announcement (link to AASB website).
 

AASB proposes extending related party disclosures to the not-for-profit public sector

The Australian Accounting Standards Board (AASB) has issued ED 214 Extending Related Party Disclosures to the Not-for-Profit Public Sector.

Australian Accounting Standard AASB 124 Related Party Disclosures (equivalent to IAS 24 in relation to for-profit entities) presently does not apply to general purpose financial statements of not-for-profit (NFP) public sector entities. Under the proposals, the requirements in AASB 124 would apply to NFP public sector entities without amendment. Accordingly, certain transactions between government-related entities of the same jurisdiction would not be required to be disclosed in detail, and other related party transactions, such as Ministerial transactions, would only be disclosed if material.

The new requirements are proposed to have an effective date of 1 July 2013.

Comments on ED 214 are due to the AASB by 31 January 2012. Click for AASB announcement (link to AASB website).
 

AASB amends consolidation requirements for Australian entities

The Australian Accounting Standards Board (AASB) has issued two Amending Standards, AASB 2011-5 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation and AASB 2011-6 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation – Reduced Disclosure Requirements.

The new standards extend relief from consolidation, the equity method and proportionate consolidation to not-for-profit entities and 'Tier 2' entities (which apply Australia's 'Reduced Disclosure Requirements', or 'RDR') in particular circumstances. The AASB considers the issue of the Standards to continue the deregulation of general purpose financial reporting introduced through AASB 1053 Application of Tiers of Australian Accounting Standards in 2010 and expects 'Tier 2' entities to be the main beneficiaries of the relief provided.

AASB 2011-5 applies to annual reporting periods beginning on or after 1 July 2011, but may be early adopted (provided certain conditions are met). AASB 2011-6 applies to annual reporting periods beginning on or after 1 July 2013, and may also be early adopted (provided AASB 1053 is also applied).

Click for AASB announcement (link to AASB website).
 

Deloitte (Australia) publication analyses the accounting implications of proposed new resources taxes

Deloitte (Australia) has published Extracting Value Issue 12 which analyses some of the conceptual accounting issues arising from the Australian Government's proposed Mineral Resource Rent Tax (MRRT) and extension of Petroleum Resource Rent Tax (PRRT).

On 10 June 2011, the Federal Government released for public comment an exposure draft for some aspects of the proposed MRRT legislation, which will apply to all iron ore and coal projects (with some limited exceptions).

The proposed introduction of the MRRT and extension of the PRRT calls into question the interpretation of International Financial Reporting Standards (IFRSs) required by the application of Interpretation 1003 Australian Petroleum Resource Rent Tax (PRRT) in Australia. It may have other financial reporting consequences at June 2011, including 'key uncertainty' disclosure in upcoming financial reports.

Click for (PDF 939k).
 

Outcomes from July AASB meeting

The Australian Accounting Standards Board (AASB) has released its Action Alert (link to AASB website) from its July meeting, held on 13-14 July 2011.

Topics discussed at the meeting included:

• Update on IASB projects – the AASB discussed its responses and plans in relation to the IASB's projects on revenue recognition, leases, consolidation - investment entities, financial instruments (impairment, and the possible deferral of the mandatory date of IFRS 9)
• Not-for-profit matters – the AASB discussed the post implementation review of AASB 1049 (the AASB will next consider a draft Amending Standard), service concession arrangements (grantor accounting), income of not-for-profit entities, IPSASB exposure draft on Conceptual Framework, June IPSASB meeting update, and upcoming public sector and not-for-profit symposiums (details)
• Other matters – Australian implications of the IASB's amendments to IAS 1 on the presentation of other comprehensive income, a decision to clarify guidelines on Reduced Disclosure Requirements (RDR), a presentation on integrated reporting, an update on the July IFRS Interpretations Committee meeting, the AASB's business plan and board membership, discussions with the Financial Reporting Council, and the forthcoming AOSSG meeting in Melbourne on 23-24 November 2011.

The next AASB meeting is due to be held on 7-8 September 2011. Click for AASB Action Alert (link to AASB website).
 

AASB removes individual KMP disclosures from AASB 124

The Australian Accounting Standards Board (AASB) has issued AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements, which removes the individual key management personnel (KMP) disclosures from AASB 124 Related Party Disclosures with effect from annual reporting periods beginning on or after 1 July 2013.

When the AASB first adopted International Financial Reporting Standards (IFRSs), it retained some pre-existing Australian disclosure requirements, including requirements for disclosures about the compensation, equity holdings and loans relating to individual KMP. AASB 2011-4 removes those additional Australian-specific requirements.

Early adoption of the Standard is not permitted to allow the relevant government agencies to consider whether there is a need to amend their existing requirements regarding disclosures relating to individual KMP and, if so, the manner in which they should be amended.

Click for AASB announcement (link to AASB website).
 

ASX Companies Update issued

The Australian Securities Exchange (ASX) has issued Update 05/11, covering the following topics:

• Carbon tax disclosure - following the release by the Australian Government on 10 July 2011 of its climate change plan, including the proposed carbon tax, the ASX reminds each listed entity to consider under the carbon tax under the continuous disclosure obligations and how these continuous disclosure obligations can be met
• Annual and half-yearly reporting for periods ended 30 June 2011 - reminders on the presentation of information, including results, dividends and distributions
• Other - including relevant email addresses, forthcoming 'non-business days' and recent listing rule amendments which are now in force regarding remuneration committees.

Click for ASX Update 05/11 (link to ASX website).
 

AASB issues improvements exposure draft

The Australian Accounting Standards Board (AASB) has issued ED 213 Improvements to IFRSs, equivalent to the IASB exposure draft of the same name.

The IASB uses the annual improvements project to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project. The ED proposes that all of the amendments will be effective for annual periods beginning on or after 1 January 2013, although entities shall be permitted to adopt them earlier.

More information about the proposals in the exposure draft can be found in our IFRS in Focus Newsletter — IASB issues Exposure Draft on Improvements to IFRSs 2011 (PDF 71k).

Comments to the AASB are requested by 6 September 2011, with comments on the IASB's exposure draft closing on 21 October 2011. Click for AASB announcement (link to AASB website).
 

ASX reminds companies about various June reporting and related obligations

The Australian Securities Exchange (ASX) has issued a Companies Update outlining a number of matters, including:

• Proposed Carbon Tax disclosure - the effect of the proposed carbon tax (as announced by the Federal Government on 10 July 2011) is a matter for each listed entity to consider under the continuous disclosure obligations
• Annual and half-yearly reporting for periods ended 30 June 2011 - how documents are to be presented, the information required for distributions, providing the audit or review report to the ASX
• Confirmation of Listing Rule amendments having come into effect - listing rules concerning the composition of the remuneration committee for listed entities in the S&P/ASX 300 came into effect on 1 July 2011
• Other - upcoming 'non-business days', communications.

Click for ASX Companies Update 05/11 (link to ASX website).
 

ASIC issues focus areas for 30 June 2011 financial reports

The Australian Securities & Investments Commission (ASIC) has highlighted a number of focus areas for directors in 30 June 2011 financial reports after releasing the results of its reviews of financial reports for the year ended 31 December 2010.

The focus areas include:

• Segment reporting
• Consolidation of controlled entities
• Use of the going concern assumption
• Asset impairment
• Fair value of financial assets
• Financial instrument disclosures
• Disclosures of estimates and accounting policy judgements
• Accounting for business combinations
• Related party disclosures
• Operating and financial review, and
• Alternative profits.

Click for ASIC press release (link to ASIC website).
 

Recommendations on Australian moves towards integrated and sustainability reporting

CPA Australia, one of the professional accounting organisations in Australia, has released a report entitled The Social Responsibility of Corporations – Recent trends and future developments in the promotion of responsible business practices.

The report contains a number of recommendations in response to The social responsibility of corporations report by the Corporations and Markets Advisory Committee (CAMAC, a body constituted under the Australian Securities and Investments Commission Act 2001). The CPA Australia report provides views in light of developments since the issue of the CAMAC report in December 2006, and suggests a number of actions that should be considered in the areas of disclosure and promotion of responsible business practices.

Included in the recommendations are the following items related to integrated and sustainability reporting:

• The Australian Government, through Treasury, should actively pursue developments in integrated reporting, particular given the International Integrated Reporting Committee's (IIRC) intentions to develop criteria for regional coverage and to present a framework proposal to the G20 November meeting in 2011. Further, that appropriate funding be provided to the Australian Accounting Standards Board (AASB) to pursue this major development in the national interest
• The Department of Sustainability, Environment, Water Population and Communities be provided with short-term funding to investigate the suitability of the Economics of Ecosystems and Biodiversity (TEEB) as a component in the development of current and future cycles of state of the environment reporting, and as a basis for assisting related environmental policy development (see our story on recent TEEB developments)
• That government agencies be required to prepare sustainability reports (prepared in accordance with current guidelines) and incorporate such reports in their annual reports to the Parliament of Australia
• That the government provide financial support for specific projects that might arise from time-to-time under the umbrella of GRI Focal Point Australia (the Australian Government announced a contribution of $400,000 over two years in June 2011)
• A Global Reporting Initiative National Annex or similar developed, with government assistance, that would assist in mapping the existing array of corporate environmental, social and governance (ESG) disclosures as a basis for simpler and more efficient reporting
• The government fund the establishment of a Sustainability Commission to set sustainability targets for Australia and monitor performance against those targets, and draft a sustainability charter to shape behaviour on sustainability.

The Australian Financial Reporting Council (FRC) has recently formed a taskforce on integrated reporting and the matter is also expected to be discussed at the July 2011 AASB meeting. Click for access to the CPA Australia report (link to CPA Australia website).
 

AASB issues exposure draft on not-for-profit public sector entities

The Australian Accounting Standards Board (AASB) is seeking comments in relation to its proposals to change the financial reporting requirements for not-for-profit entities, including government departments and statutory authorities, within the General Government Sector of the State, Territory and Federal Governments.

The proposals are contained in Exposure Draft ED 212 Not-for-Profit Entities within the General Government Sector, which is open for comment until 31 October 2011.

Click for AASB press release (link to AASB website).
 

Australian regulator calls for improved disclosure in remuneration reports

The Australian Securities & Investments Commission (ASIC) has called for companies to provide more clarity on the remuneration arrangements for their directors and executives.

Under the Australian Corporations Act 2001, listed companies are required to prepare a remuneration report as part of their annual reporting process. ASIC has identified a number of areas where disclosure to shareholders can be improved based on a review of 60 remuneration reports for listed companies for the year ended 30 June 2010.

ASIC notes the following areas where disclosures about remuneration arrangements could be more effective:

• The board's policy on the nature and amount of remuneration of the key management personnel
• The non-financial performance conditions in short-term incentive plans
• Why performance conditions have been chosen
• The terms and conditions of incentive plans.

Click for ASIC press release (link to ASIC website).
 

New laws on executive remuneration passed by the Parliament

The Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011 was passed by the Australian Senate on 20 June 2011, paving the way for new requirements to commence from 1 July 2011.

Some of the key reforms include giving shareholders more power to have a say over remuneration, improving the requirements for disclosure of remuneration consultants and prohibiting directors from hedging their remuneration or voting on the remuneration of key management personnel.

Under a new 'two-strikes' rule, if the company's remuneration report has received a 'no' vote of 25 per cent or more at two consecutive annual general meetings, shareholders will have the opportunity to vote on a motion to spill the board. Where a spill motion has been supported by a majority of shareholder votes, directors will face fresh elections at a subsequent spill meeting.

Click for Australian Government press release (link to Australian Treasury website).
 

AASB extends deadline for completion of questionnaire on intangible assets

Further to our earlier story, the Australian Accounting Standards Board (AASB) has announced an extension of the closing date for the AASB staff research questionnaire for preparers, advisors, auditors and regulators on initial accounting for intangible assets acquired in business combinations.

The survey is a part of research being undertaken by AASB staff into the accounting for intangible assets under the aegis of the National Standard Setters (NSS) group and input received will be given to the IASB and FASB in relation to any future project they may undertake on intangible assets.

The AASB is seeking input on a global basis and the deadline for completion of the questionnaire has been extended to Friday, 15 July 2011. Click for:

• AASB announcement (link to the AASB website)
• Questionnaire on the initial accounting for intangible assets (link to external survey site).
   

Outcomes from June AASB meeting

The Australian Accounting Standards Board (AASB) has released its Action Alert (link to AASB website) from its June meeting, held on 8-9 June 2011.

Topics discussed at the meeting included:

• Recently issued IASB standards – the AASB expects to issue, out of session, Australian equivalents to IFRS 10 Consolidated Financial Statements (issued May 2011), IFRS 11 Joint Arrangements (issued May 2011) and IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011), IAS 27 Separate Financial Statements (as amended in 2011), IAS 28 Investments in Associates and Joint Ventures and IFRS 13 Fair Value Measurement. Exposure drafts proposing disclosure relief for 'Tier 2' entities (applying the Reduced Disclosure Regime, or RDR), are also expected to be issued
• Imminent IASB standards – the AASB discussed the amendments to Australian guidance (in relation to not-for-profit or public sector entities and the RDR) arising from the expected IASB amendments to IAS 1 Presentation of Financial Statements and IAS 19 Employee Benefits
• Update on IASB projects – the AASB discussed the IASB's projects on financial instruments (impairment, hedge accounting and offsetting), insurance contracts, leases and revenue recognition
• Differential reporting – the AASB received a presentation from the external consultants engaged in the differential reporting research project (which may result in the removal of the 'reporting entity' concept from Australian Accounting Standards)
• Other matters – discussion on proposed amendments to AASB 124 Related Party Disclosures (removal of individual key management personnel disclosures), update on IFRS Interpretations Committee Interpretations, progress on development of an exposure draft on income of not-for-profit entities, proposed guidance on the IFRS for SMEs, IPSASB Conceptual Framework, and an update on auditing developments.

The next AASB meeting is due to be held on 13-14 July 2011. Click for AASB Action Alert (link to AASB website).
 

Model financial statements for Australian 'Reduced Disclosure Requirements' for June 2011

Deloitte (Australia) has published Reduced Disclosure Requirements - Model Financial Statements (PDF 914k). In July 2010, the Australian Accounting Standards Board (AASB) 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. The AASB has decided not to implement the IFRS for SMEs in the Australian context at this time. Instead, eligible entities can elect to adopt the 'Reduced Disclosure Requirements' (RDR), which requires entities to follow the recognition and measurement requirements of all Australian Accounting Standards (which are equivalent to IFRSs), but with reduced disclosure requirements. This publication illustrates the disclosures required to comply with the RDR for financial years ending on or after 30 June 2011. Click for Reduced Disclosure Requirements - Model Financial Statements (PDF 914k).

New edition of 'Monthly Roundup' from Deloitte (Australia)

Deloitte Australia has issued Monthly Roundup May 2011, which summarises . The publication highlights the new batch of IASB standards forming the 'next wave', new Accounting alerts on topical issues for 30 June 2011 reporting and the standards issued as a result of 'phase 1' of the Trans-Tasman convergence project with the New Zealand Accounting Standards Review Board (ASRB).

Past edition of Monthly Roundup are available at www.deloitte.com/au/monthlyroundup.
 

New Accounting alerts from Deloitte (Australia)

Deloitte Australia has issued the following Accounting alerts:

• Accounting alert 2011/01 – Financial reporting in an environment of uncertainty. Provides a broader perspective on the areas of Accounting Standards that may require additional attention in the current economic climate for June 2011 financial reporting
• Accounting alert 2011/02 – Accounting for the impacts of natural disasters. Sets out a number of financial reporting implications can arise as a result of a natural disaster, focusing on considerations for entities that may have been directly or indirectly affected by these events or others which may occur
• Accounting alert 2011/03 – Financial reporting impacts of the proposed Australian carbon pricing mechanism. Sets out a number of financial reporting implications arising at 30 June 2011 from the Federal Government's proposal for a two-stage plan for a carbon price mechanism for the Australian economy
• Accounting alert 2011/04 – Financial reporting impacts of recent and proposed tax changes. Sets out some general financial reporting considerations as at 30 June 2011 in relation to recent and proposed tax law changes
• Accounting alert 2011/05 – Non-financial reporting (including sustainability and integrated reporting). Sets out a number of considerations for 30 June 2011 in relation to non-financial reporting, such as gender diversity, sustainability and integrated reporting.

We maintain a summary of all the Australian Accounting alerts Here.
 

Australian forum discusses how integrated reporting can drive good governance

CPA Australia and the Institute of Chartered Accountants in Australia, together with the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC), hosted a forum for local professional accountants in Melbourne, Australia on 13 May 2011. The focus of the forum was on how professional accountants in business can support their organisations to improve governance practices through the integration of financial and non-financial information into their reporting, including a focus on environment, social, and governance (ESG) factors.

The key conclusions of the forum were as follows:

• Integrated reporting needs to reflect an organisation's strategy and values, as well as how it is managed in social, environmental, and economic dimensions of performance
• The process of integrated reporting, in turn, is a powerful tool to help drive an organisation's strategic agenda, providing management with key drivers of performance
• Integrated reporting has to be open and transparent by reflecting both improvements in performance as well as weaknesses
• Pension fund investors, as well as some other institutional investors, are increasingly looking for financial implications of ESG factors to understand how an organisation's strategy and operations are affecting the numbers and key measures of performance.

Click for:

• IFAC press release (link to IFAC website)
• Our sustainability page.
   

Australia harmonises standards with IFRSs, New Zealand

The Australian Accounting Standards Board (AASB) has released a number a standards to give effect to 'Phase 1' of the joint harmonisation programme being undertaken by the AASB and the New Zealand Accounting Standards Review Board (ASRB).

The new Standards are:

• AASB 1054 Australian Additional Disclosures (link to AASB website, PDF 245k) sets out the Australian-specific disclosures that are additional to IFRSs in areas such as compliance with Australian Accounting Standards, the nature of financial statements (general purpose or special purpose), audit fees, imputation (franking) credits and the reconciliation of net operating cash flow to profit (loss)
• AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project (link to AASB website, PDF 94k) makes amendments to a range of pronouncements, deleting various Australian-specific guidance and disclosures from other Standards and more closely aligning the wording used to that adopted in IFRSs. The 'true and fair override' is introduced into AASB 101 Presentation of Financial Statements (equivalent to IAS 1), but its application in the Australian context is limited by an additional 'Aus' paragraph
• AASB 2011-2 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project – Reduced Disclosure Requirements (link to AASB website, PDF 48k) establishes reduced disclosure requirements for entities preparing general purpose financial statements under Australia's revised differential reporting framework.

In August 2009, the Prime Ministers of both countries released a Joint Prime Ministerial Statement of Intent and the Single Economic Market Outcome Proposals. The completion of Phase 1 of the convergence programme is expected to open the way for the relevant government agencies to remove the burdens associated with regulation affecting financial reporting by branches, subsidiaries and sub-consolidations in both countries.

The revised requirements are required to be applied for annual reporting periods beginning on or after 1 July 2011 (except AASB 2011-2, which is effective from 1 July 2013). Click for:

• AASB/FRSB press release (link to AASB website)
• What's new in financial reporting for June 2011 – a publication maintained by Deloitte (Australia) listing new and revised accounting pronouncements
• Our earlier story on New Zealand's issue of equivalent standards
• Our earlier story on the harmonisation programme.
   

New publications from Deloitte (Australia)

Deloitte Australia has issued the following publications:

• Model financial statements for June 2011 – illustrative best practice disclosures for general purpose financial statements for annual reporting periods ending on or after 30 June 2011, incorporating recent changes in pronouncements
• Monthly Roundup (April 2011) – a summary of financial reporting developments during April 2011, including discussion of June 2011 financial reporting resources, the IASB-FASB convergence report and an upcoming IFRS webcast.
   

New publications from Deloitte (Australia)

Deloitte Australia has issued the following publications:

• What's new in financial reporting for June 2011 – a guide to new and revised accounting pronouncements and other financial reporting considerations for the June 2011 reporting season
• Monthly Roundup (March 2011) – a summary of financial reporting developments during March 2011, including discussion of the revised IASB work plan, proposed guidance on additional financial information from the Australian Securities & Investments Commission (ASIC) and the UK/NZ study on reducing IFRS disclosures
• Extracting Value Issue 11 – an update on the IASB's leasing project for resources companies.
   

Australia seeks recognition of 'Reduced Disclosure Regime' (RDR)

The Australian Accounting Standards Board (AASB) has written to the IASB requesting acknowledgement of Australia's 'Reduced Disclosure Regime' (RDR) within the broader IFRS framework.

The RDR involves the same recognition, measurement and presentation requirements as IFRS, but with significantly reduced disclosures (based on the disclosure relief included in the IFRS for SMEs). Malaysia has recently proposed a similar RDR regime for certain entities, and New Zealand is also considering moving towards an RDR regime for its non-publicly accountable entities.

Following is an extract from the AASB's letter, publicly tabled at last week's February 2011 AASB meeting:

Click for AASB Letter to the IASB (link to AASB website).

AASB questionnaire on initial accounting for intangible assets

The Australian Accounting Standards Board (AASB) has created a worldwide online questionnaire to gather information from preparers, advisors, auditors and regulators on the initial accounting for intangible assets acquired under IFRS 3 Business Combinations and IAS 38 Intangible Assets (or similar GAAP).

The survey is a part of research being undertaken by AASB staff into the accounting for intangible assets under the aegis of the National Standard Setters (NSS) group. The results of the survey will be compiled by AASB staff and a report of the findings is expected to be provided to the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) as input to any future reviews they may conduct in relation to IFRS 3 and IAS 38.

The deadline for submission is 17 June 2011 and it is anticipated that the questionnaire will take approximately 20-30 minutes to complete. Click for:

• AASB press release (link to the AASB website).
• Questionnaire on the initial accounting for intangible assets (link to external survey site).

December 2010 half-year model financial report for managed investment schemes

Deloitte (Australia) has published Model managed investment scheme financial report 31 December 2010 (PDF 724k). The model financial report has been designed to assist with the preparation of half year financial reports for a managed investment scheme in accordance with Australian Accounting Standards for the half year ending on or after 31 December 2010. This publication is organised into four sections: a summary of new pronouncements, a guide to local reporting obligations, an illustrative half-year report and a presentation and disclosure checklist. Click for Model managed investment scheme financial report 31 December 2010 (PDF 724k).

New Australian Accounting Alert discusses December AASB meeting outcomes

Deloitte (Australia) has published Accounting Alert 2010/13, dealing with the outcomes from the Australian Accounting Standards Board (AASB) meeting held on 27-28 October 2010.

At its meeting on 8-9 December 2010, the AASB closed out 2010 with agreement to finalise a number of pronouncements early in 2011 (some by out-of-session vote): Trans-Tasman convergence standards, a superannuation exposure draft, equivalents to the IASB's consolidation suite of standards and a revised Conceptual Framework which will be equivalent to the IASB's revised Framework for for-profit entities.

Click to access Accounting Alert 2010/13.
 

What's new in the December financial reporting cycle?

Deloitte (Australia) has published What's new in the December 2010 financial reporting cycle? Regularly updated throughout the financial reporting season, the guide 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 .

Click to access What's new in the December 2010 financial reporting cycle? Previous editions can be found at www.deloitte.com/au/whatsnew.
 

December 2010 half-year model financial report

Deloitte (Australia) has published December 2010 Half-Year Model Financial Statements (PDF 1,371k). The model financial statements illustrate disclosures to comply with AASB 134 Interim Financial Reporting (equivalent to IAS 34) and other relevant Australian reporting requirements, for half-years ending on or after 31 December 2010. Click for December 2010 Half-Year Model Financial Statements (PDF 1,371k).

Model financial statements for Australian 'Reduced Disclosure Requirements'

Deloitte (Australia) has published Reduced Disclosure Requirements - Model Financial Statements (PDF 1,019k). In July 2010, the Australian Accounting Standards Board (AASB) 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. The AASB has decided not to implement the IFRS for SMEs in the Australian context at this time. Instead, eligible entities can elect to adopt the 'Reduced Disclosure Requirements' (RDR), which requires entities to follow the recognition and measurement requirements of all Australian Accounting Standards (which are equivalent to IFRSs), but with reduced disclosure requirements. This publication illustrates the disclosures required to comply with the RDR. Click for Reduced Disclosure Requirements - Model Financial Statements (PDF 1,019k).

Australian publication on considerations for CFOs from leases proposals

Deloitte (Australia) has published CFO Brief - Gearing up for change: New Lease Accounting Proposals (PDF 2,831k). The publication provides an overview of the IASB's leases proposals, the likely impact on financial metrics (including the impacts on expense profiles), stakeholder impacts and a summary of matters for Chief Financial Officers (or their equivalents) to consider. The publication will be useful to audiences outside of Australia as well, as many of the topics discussed are relevant globally. Click for: CFO Brief - Gearing up for change: New Lease Accounting Proposals (PDF 2,831k) Our leases project summary.

New Australian Accounting Alert discusses October AASB meeting outcomes

Deloitte (Australia) has published Accounting Alert 2010/12, dealing with the outcomes from the Australian Accounting Standards Board (AASB) meeting held on 27-28 October 2010.

The meeting was partly a joint meeting with the New Zealand Financial Reporting Standards Board (FRSB). The Boards are moving closer to harmonising financial reporting standards between the two countries, whilst maintaining compliance with IFRSs for larger for-profit entities (and reintroducing IFRS options in some cases). The Boards expect to finalise the first phase of the convergence project early in 2011.

The AASB also decided not to support Draft Interpretation DI/2010/1 Stripping Costs in the Production Phase of a Surface Mine due to a lack of apparent diversity in practice, an inappropriate unit of account and lack of clarity on the meaning of 'stripping campaign'. The Draft Interpretation is quite contentious in the Australian context due to the country's large resources base and prevalent use of the 'stripping ratio' approach to account for these costs.

Click to access Accounting Alert 2010/12.
 

Australia considers extending consolidation and related exemptions

The Australian Accounting Standards Board (AASB) has issued an exposure draft which would permit more Australian entities to avoid consolidation under AASB 127 Consolidated and Separate Financial Statements, equivalent to IAS 27 of the same name. Similarly, extensions of the exemptions in the Australian equivalents to IAS 28 and IAS 31 are also proposed.

Under Australian Accounting Standards, some entities, including not-for-profit entities and entities applying the AASB's differential reporting regime, are not able to state compliance with IFRS due to specific Australian requirements or disclosure exemptions. The AASB's proposals in ED 205 Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation would permit entities that are otherwise compliant with Australian Accounting Standards to take advantage of the exemptions in IAS 27, IAS 28 and IAS 31 in some cases.

Click for:

• AASB press release (link to AASB website)
• Deloitte Australia Accounting Alert explaining the AASB's differential reporting regime.
   

Deloitte Australia 'Extracting Value' publication

Deloitte Australia's Energy & Resources group has published Issue 9 of its Extracting Value publication (PDF 266k), discussing Draft Interpretation DI/2010/1 Stripping Costs in the Production Phase of a Surface Mine, which is open for comment until 30 November 2010. There is widespread use in Australia of the 'stripping ratio' approach to account for waste and overburden removal cost during the production phase of a mining operation. The publication discusses the issues arising in the Australian context from the proposals in DI/2010/1. Click for: Extracting Value Issue 9 Draft Interpretation on stripping costs - understanding the impacts (PDF 266k) (an online version is also available) Past editions of 'Extracting Value'

Australia and New Zealand to harmonise Standards, more closely align with IFRSs

The Australian Accounting Standards Board (AASB) and New Zealand Financial Reporting Standards Board (FRSB) have issued joint exposure drafts of proposals to harmonise Australian and New Zealand Standards in relation to entities applying IFRSs as adopted in Australia and New Zealand. The exposure drafts propose to eliminate many of the IFRS-related differences between the two countries for for-profit entities and represent the first phase of a longer-term project to harmonise accounting requirements in Australia and New Zealand. For-profit entities applying Australian Accounting Standards or NZ IFRSs in full already make an explicit and unreserved statement of compliance with IFRSs, and the proposals would not impact this ability. Deloitte (Australia) has issued an Accounting alert explaining the proposals. The exposure drafts make the following observations: Both Australia and New Zealand have adopted financial reporting standards based on IFRSs. However, on transition to IFRSs each jurisdiction independently modified the source IFRSs for reasons relevant to that jurisdiction. Certain aspects of IFRSs as adopted in Australia are not the same as IFRSs as adopted in New Zealand. Partly as a result of direct initiatives of the AASB and the FRSB and partly as a result of the Joint Prime Ministerial Statement of Intent and the Single Economic Market Outcome Proposals issued in August 2009, the Boards initiated this project aimed at achieving converged standards in respect of for-profit entities applying full Australian or New Zealand standards. Click for: Deloitte (Australia) Accounting alert 2010/09 Trans-Tasman convergence - unravelling the tangled web New Zealand Financial Reporting Standards Board (FRSB) announcement (link to FRSB website) Australian Accounting Standards Board (AASB) announcement (link to AASB website) Our New Zealand country page Our summary of use of IFRS by jurisdiction   Australia overlooks IFRS for SMEs in favour of 'Reduced Disclosure Requirements' The Australian Accounting Standards Board (AASB) has issued amendments to Australian Accounting Standards to implement a 'Tier 2' reporting framework based on 'Reduced Disclosure Requirements' (RDR) instead of implementing the IFRS for SMEs. The RDR permits for-profit entities without 'public accountability' to elect to comply with the recognition and measurement requirements of Australian Accounting Standards (which are equivalent to IFRS for for-profit entities), but to avoid many of the disclosures required by those standards in general purpose financial statements. Not-for-profit and certain public sector entities are also eligible to apply the RDR. Entities applying the RDR will not be able to make an explicit and unreserved statement of compliance with IFRSs, however this will still apply to for-profit entities applying standards in full ('Tier 1'). The Tier 2/RDR will apply to annual reporting periods beginning on or after 1 July 2013, but may be early adopted for annual financial reporting periods beginning on or after 1 July 2009. A second stage of the AASB's project will consider whether the 'Tier 2' requirements should be extended to the 'non-reporting entities' under Australia's existing differential reporting regime (these entities produce limited financial statements and do not claim compliance with IFRS). Deloitte (Australia) has produced a series of Accounting Alerts tracking the progress of the AASB's project. Extracts from the Basis for Conclusions on the AASB amendments: The Board concluded that the IFRS for SMEs is not presently a suitable set of requirements for Tier 2 in Australia. However, the Board decided it will continue to monitor and contribute to further changes in the IFRS for SMEs and that it is open to the possibility of adopting the IFRS for SMEs in future should the changes in that Standard make it practicable in an integrated for-profit/NFP sector reporting environment. The Board decided that Tier 2 requirements should be maintained on a continuous basis, rather than waiting for the IASB to update its IFRS for SMEs, which the IASB plans to undertake only every few years, by which time there would be an accumulation of possible changes. The AASB intends that each future Exposure Draft or Invitation to Comment involving changes to Tier 1 that includes disclosure proposals would seek comment about which disclosures should be included in Tier 2, and may include the AASB�s proposed reduced disclosures. Click for: Deloitte (Australia) Accounting alert 2010/08 Financial reporting reform - understanding change Australian Accounting Standards Board press release (link to AASB website) Our summary of the IFRS for SMEs

June 2010 annual model financial statements

Deloitte Australia has released their model financial statements for financial years ending on or after 30 June 2010. Australian accounting standards are identical to IFRSs. The main changes from 2009 that are illustrated in this publication are: AASB 3 Business Combinations (2008) AASB 7 Financial Instruments AASB 8 Operating Segments AASB 101 Presentation of Financial Statements AASB 127 Consolidated and Separate Financial Statements (2008) AASB 1039 Concise Financial Reports The Illustrative Annual Report is released in four parts plus a summary of Key Changes at your Finger Tips: Key Changes at your Finger Tips (PDF 335k). A summary of major changes affecting this year's disclosures. Section A – What's new in Financial Reporting? (PDF 271k). Provides a summary of the changes to pronouncements, as well as links to where you can find further information that may be helpful. Section B – Model Annual Report for a Consolidated Entity (PDF 1,440k). Section C – Model Concise Report for a Consolidated Entity (PDF 462k). Australian Corporations Law permits an entity to fulfil its annual reporting obligation to shareholders by providing a 'concise financial report for the year drawn up in accordance with accounting standards made for the purposes of this paragraph'. In June 2009 the Australian Accounting Standards Board issued an updated version of AASB 1039 Concise Financial Reports (Available Here (PDF 61k)). Section D – Reporting Obligations (PDF 196k). Contains useful information on the requirements to prepare, audit, and lodge financial reports, reporting deadlines under Australian laws and regulations, and information about Australia's proposed differential reporting regime.

Analysis of extractive industries Discussion Paper

Deloitte Australia's Energy and Resources Group has published Issue 6 of the Extracting Value Newsletter (PDF 204k), a special edition focusing exclusively on the draft Discussion Paper (DP) Extractive Activities, recently released 'for information purposes' by the IASB. Whilst ostensibly proposing approaches producing outcomes similar to common industry practice, there are a number of interesting issues and considerations arising from the draft Discussion Paper – such as potentially mandating capitalisation of exploration expenditure and much more information about the fair value of reserves and resources. This edition of Extracting Value explores some of these issues, beginning the commercial and pragmatic analysis of the proposals. An excerpt: In summary terms, the Discussion Paper proposes to: introduce mineral reserve and resource definitions based on industry practice eliminate 'phase accounting' – separate accounting for exploration and evaluation, development, production and so on – in favour of one asset, either a 'mineral asset' or 'oil and gas asset' account for mining and oil and gas projects using a 'unit of account' which is effectively the 'area of interest' accounting commonly used in Australia under current standards require measurement based on historical cost, but countenancing the possibility of using another measure such as current value or (more likely) fair value retain a modified impairment approach to assets in the exploration and evaluation stage introduce extensive disclosures, including a form of 'standardised value' for reserves/resources and possibly responding to the 'publish what you pay' lobby.

Financial reporting issues facing the resources sector

Deloitte (Australia) has published the December 2008 issue of Extracting Value – an occasional series addressing the issues facing the resources industry (mining and oil and gas companies). This issue focuses on the financial reporting implications for the resources sector of the global financial crisis. Click to download Extracting Value - December 2008 (PDF 2,051k). The publication includes the following table highlighting some financial reporting areas that resources companies should consider in responding to the global credit crisis in the upcoming reporting season. Many of these are equally applicable to companies in other industries:

Area	Example considerations
Impairment	likelihood of increased risk premiums being built in discount rates due to a lower risk appetite in current market rapid changes in short term interest rates and their effects on discount rates assumptions underlying reserve and resource amounts may need revision long-term commodity price and exchange rate assumptions need careful consideration on the cost side, inflation assumptions may be difficult to determine as growth slows and reverses simultaneously across many of the world's economies
Loans, borrowings and other financing	project financing plans may require reassessment classification of debt as current or non-current in light of potential covenant breaches and unusual embedded terms which may be triggered in the current economic climate fair value considerations where longer-term funding is not based on current margin spreads and the effects of a rapidly falling interest rate environment possibility of embedded derivatives in old or newly renegotiated contracts that may have value in the current climate, even if previously immaterial or not identified
Provisions and other long-term obligations	long-term discount rates may materially impact the carrying amount of decommissioning and similar provisions, triggering adjustments under Interpretation 1 consideration of whether contractual obligations may have become onerous in light of current market conditions
Financial instruments	counterparty risk and fair values may require reassessment effectiveness testing of hedging arrangements may come under pressure in volatile markets consideration of terms in loan and other agreements which may contain embedded derivatives, particularly those that were previously of little value or not previously identified consider whether items classified as 'cash equivalents' still meet the definition whether contracts which previously met the 'own use' exemption under AASB 139 [IAS 39] are still able to meet the exemption requirements due to net settlement
Depreciation, amortisation and depletion	reserve and resources estimates may need revision the effect and timing of changes in estimates on current year amortisation needs to be considered
Share-based payments	accounting for cancellation or modification of share-based payment schemes can have a significant impact on reported profits valuation of share-based payment arrangements under AASB 2 [IFRS 2] can be more judgemental in a volatile environment
Deferred taxes	careful reassessment of the recognition criteria for deferred tax assets may be required, particularly in relation to capital losses recognised on the basis of anticipated capital gains and tax losses that may be subject to loss integrity measures under the tax law (same business test, continuity of ownership test, etc)
Investments	many resources companies have 'strategic' interests in other entities, these must generally be fair valued to current market prices 'available-for-sale' reserves that are in debit (losses) may need to be recycled to the income statement, directly impacting profits
Disclosures	market reaction to disclosures around impairment, particularly key assumptions and sensitivity analyses (whether impairment losses have been recognised or not) consideration should be given to enhancing disclosures around significant estimates and judgements under AASB 101 [IAS 1] – this is an area where Australian entities sometimes trail global best practice AASB 7 [IFRS 7] disclosures around risks, how they are managed, and sensitivity analyses may take on increased importance increased scrutiny of liquidity disclosures might be expected fair value disclosures will need to be carefully considered and measured

What's new in financial reporting for December 2008?

Deloitte (Australia) has published What's New in Financial Reporting for December 2008? (PDF 172k). This publication provides a high level overview of new and revised financial reporting requirements that need to be considered for periods ending on 31 December 2008. 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 2008 reporting close process. The information was last updated on 30 October 2008 for developments to that date. Deloitte (Australia) will update this Information On-line if any significant developments occur in the period to 31 March 2009.

Research report on intangibles

The Australian Accounting Standards Board (AASB) has published Initial Accounting for Internally Generated Intangible Assets, a discussion paper addressing the inconsistent accounting treatments for intangible. The discussion paper, authored by staff of the AASB, with the encouragement and support of the group of National Standard Setters (NSS), represents a significant step toward encouraging the International Accounting Standards Board to review its existing accounting standards relating to intangible assets. Currently, accounting standards treat intangible assets acquired as part of a business acquisition differently from the same kind of intangible assets that are internally generated. Comments on this paper are requested by 15 May 2009. The AASB intends that comments received on the paper will provide valuable input into any future work on intangible assets that the IASB might initiate. In December 2007, the IASB rejected an agenda proposal on intangibles. Click for:

• Discussion Paper (PDF 677k) – it is copyrighted by the Commonwealth of Australia and posted here with permission
• AASB Press Release (PDF 32k)

What's new in financial reporting for December 2008?

Deloitte (Australia) has published What's New in Financial Reporting for June 2008? (PDF 644k). This publication provides a high level overview of new and revised financial reporting requirements that need to be considered for periods ending on 30 June December 2008. 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 June 2008 reporting close process.

Deloitte Australia Insights Podcast on the 'IFRS experiment'

Deloitte (Australia) has released a new Insights Podcast discussing IFRS-related issues. In this podcast, Bruce Porter, leader of Deloitte's Accounting Technical group in Australia and member of the AASB, talks with Stig Enevoldsen, Chairman of the Technical Expert Group of the European Financial Reporting Advisory Group (EFRAG) and a partner of the Deloitte practice in Denmark, about the experience with IFRSs in Europe and Australia and the key IFRS challenges moving forward. Click here to Access the Deloitte Australia Insights Podcast.

Deloitte Australia Insights Podcast on revised business combination requirements

How will the new business combination accounting requirements affect you? In this Deloitte Australia Insights podcast, Deloitte partners Stephen Ferris and Debbie Hankey discuss the recent amendments to accounting for mergers, acquisitions and similar transactions made by the International Accounting Standards Board (IASB).

Debbie and Stephen explore some of the practical aspects of the major changes resulting from the amendments, including:

• the immediate expensing of transaction costs
• new volatility in reported profits arising from share-based payment arrangements, earn outs and other contingent arrangements, and pre-existing relationships
• the use of the 'full goodwill' method to account for acquisitions
• an expanded emphasis on fair value
• what C-level executives need to do to prepare for the changes.

Click for Access to Podcast.

New Deloitte Australia 'what's new in financial reporting' checklist

Deloitte (Australia) has published What's New in Financial Reporting for December 2007 (PDF 165k). This guide 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 2007. Entities can use this listing to perform a quick check that all new financial reporting requirements have been fully considered as part of their June reporting close process.

New Deloitte Australia 'what's new' checklist

Deloitte (Australia) has published What's New for June 2007 (PDF 306k). This guide 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 2007. Entities can use this listing to perform a quick check that all new financial reporting requirements have been fully considered as part of their June reporting close process.

However, the Board agreed that for corporates that do not satisfy the definition of a publicly accountable entity (as defined by the IASB) but are envisaged as being of high public interest because of their economic importance or dominant market position, a size test should be devised to differentiate between those that should follow A-IFRS and those that should follow an Australian SME Standard. Similar tests will also be proposed for non-corporate for-profit entities.

The AASB agreed not to propose any disclosure concessions for wholly-owned subsidiaries that follow A-IFRS. Instead, the AASB proposed that such entities should follow A-IFRS if they are publicly accountable, whereas those that are not would follow an Australian SME Standard in its entirety (that is, including all disclosures) unless they chose to use A-IFRS.

The Board agreed that not-for-profit entities and public sector entities should generally be regarded as publicly accountable, but due to cost-benefit considerations, a two-tiered system based on a size test is appropriate. The top-tier would apply A-IFRS and the second tier would apply an Australia SME Standard.

The AASB will consider a draft Australian preface to the IASB's ED of IFRS for SMEs for consideration at its April 2007 meeting with a view to exposing the document in Australia in May.

The AASB has approved AASB 8 Operating Segments, confirming its scope to be limited to for-profit entities with publicly traded securities. Although it is applicable to annual reporting periods beginning on or after 1 January 2009, the Standard can be early adopted. Therefore, reporting entities that do not have publicly traded securities can early adopt the standard and thereby avoid segment reporting.

In March 2007 the AASB began its review of submissions on ED 151 Australian Additions to, and Deletions from, IFRS. The vast majority of the proposals in the ED where confirmed, including the introduction of a number of IFRS options not previously available under A-IFRS. A draft amending Standard is to be considered at the AASB's April meeting.

The AASB has also approved the following during February and March:

• Interpretation 11 AASB 2 - Group and Treasury Transactions (equivalent to IFRIC 11),
• Interpretation 12 Service Concession Arrangements (equivalent to IFRIC 12),
• ED 152 Proposed Amendments to AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards - Cost of an Investment in a Subsidiary,
• ED 153 Proposed Amendments to AASB 124 Related party Disclosures - State-controlled Entities and the Definition of a Related Party, and
• ED 154 Proposed Amendments to AASB 102 - Inventories Held for Distribution by Not-for-Profit Entities.

The AASB also discussed accounting by superannuation plans and continued to progress GAAP/GFS harmonisation and other not-for-profit entity issues (including the measurement of inventories).

The impacts of the revised AASB 101 are to eliminate much of the Australian specific content in AASB 101, including the Australian illustrative formats of the income statement, balance sheet and statement of changes in equity which entities were previously 'encouraged' to adopt in preparing their financial statements. In addition a number of other disclosure requirements have been deleted from AASB 101.

In November 2006, the AASB finalised its deliberations on differences between A-IFRSs and IFRSs in relation to for-profit entities and has agreed to issue ED 151 Australian Additions to, and Deletions from, IFRSs. Comments close on 31 January 2007.

The ED proposes to allow entities the option to:

• prepare cash flow statements using the 'indirect' method.
• use proportionate consolidation to account for their jointly controlled entities
• account for government grants as deferred income or as a deduction from the related asset. The choice affects the timing of recognition of the grant as income
• account for government grants in the form of a transfer of a non-monetary asset for use by the recipient at fair value or nominal amount
• disclose government grants related to income as a credit in profit and loss or as a deduction from the related expense
• disclose a reconciliation between the average effective tax rate and the applicable tax rate instead of reconciliation between tax expense and accounting profit multiplied by the tax rate. Also, the ED proposes eliminating the additional disclosures related to the treatment of exchange differences on deferred taxes.

ED 151 also proposes that entities will no longer be required to make many of the current Australian specific disclosures. The proposed application date of the amendments to annual reporting periods beginning on or after 1 July 2007, with early adoption permitted.

The AASB continued to debate whether, and if so how, the IASB SME project proposals should be implemented in Australia. The Board also agreed that there is a need to revisit the current practice of identifying the Standards that entities are required to apply. The AASB appears to favour a concept based on 'public accountability' rather than the 'reporting entity' for differential reporting. At its December meeting, the AASB considered some approaches that might be adopted in relation to various groups of entities, including the possibility of an AASB-developed 'size test' for certain entities. No conclusions were reached.

Following the IFRIC decision in March 2006 not to add the issue to its agenda, the AASB initially released a rejection notice that Petroleum Resource Rent Tax (PRRT) was within the scope of AASB 112 Income Taxes. However, following concern expressed about the decision and the lack of due process, the AASB subsequently called for submissions on whether PRRT was within the scope of AASB 112. As a consequence of submissions received on the invitation to comment, in December the Board agreed to:

• revise its original agenda rejection statement to remove the statement that PRRT is within the scope of AASB 112 Income Taxes
• form an Advisory Panel to recommend to the Board on whether PRRT should or should not be accounted for as an income tax under AASB 112.

The AASB continued its review of public sector specific accounting standards. The Board met with public sector constituents to discuss their views on the treatment of particular issues arising out of the short-term review of the requirements in public sector specific standards in Australia. The Board subsequently asked staff to draft an ED for consideration at a future meeting that proposes amendments to a number of Standards to pick up the issues currently addressed in public sector specific standards that are not adequately addressed in other Standards.

As part of its short term review the AASB also extended the current exemption for accounting for land under roads for a further twelve months until 31 December 2007. The Board made it very clear that this extension will not be repeated.

The Board has yet to approve the following, but intends to do so in early 2007:

• IFRS 8 Operating Segments.
• IFRIC 11 IFRS 2 - Group and Treasury Share Transactions.
• IFRIC 12 Service Concession Arrangements. As this Interpretation does not address accounting by the grantor (usually the government), the AASB agreed to form an Advisory Panel to advise on accounting for service concession arrangements by the grantor.

2 December: Australia proposes to undo changes it made to IFRSs

On 30 November 2006, the Australian Accounting Standards Board (AASB) issued Exposure Draft ED 151 Australian Additions to, and Deletions from, IFRSs for comment. ED 151 can be downloaded from the AASB Website (PDF 100kb). ED 151 reflects the AASB's recent decision to make Australian accounting requirements the same as IFRSs in respect of for-profit entities. To this end, the exposure draft proposes reinstating various accounting policy options that were previously deleted in making the existing suite of A-IFRS, and removing certain Australian-specific disclosures.

One key aspect of the report is the identification and evaluation of other options for standard-setting in Australia. The options identified include:

• two or more different sets of standards;
• alternative approaches to a single-set of standards;
• the possibility of more than one standard setting board; and
• options to enhance the current approach.

Any modification to the AASB's current sector-neutral approach will have a potentially significant impact on the public sector and the other not-for-profit sectors.

In recent meetings, the AASB continued its review of public sector specific accounting standards, and also continued their discussions on Australian specific changes made to the IFRSs in developing Australian equivalents to IFRSs. This is likely to result in the reversal of many of the changes made to the IFRSs in the process of making the Australian equivalents to IFRS, for example, reinstating all options that currently exist in IFRS and eliminating additional Australian disclosures.

In September 2006 the AASB approved:

• AASB 1049 Financial Reporting of General Government Sectors by Government, applicable for annual reporting periods beginning on or after 1 July 2008, with early adoption permitted. The Standard applies to each government in relation to its general government sectors and requires compliance with other Accounting Standards with certain exceptions. The key difference relates to which entities should be consolidated and the consequential accounting for investments in controlled entities. In addition, extra disclosure is required regarding key fiscal aggregates determined in accordance with Australian Bureau of Statistics Government Financial Statistics Manual.
• AASB Interpretation 10 Interim Financial Reporting and Impairment, the Australian equivalent to IFRIC Interpretation 10.
• A rejection statement on Leases: Recognition of Contingent Rentals, consistent with the IFRIC agenda decision,
• A request for comment on the IASB Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information.

The AASB noted that ED 148 Proposed Amendments to AASB 101 Presentation of Financial Statements: A Revised Presentation (consistent with IASB ED Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation), released in March 2006 contains an international definition of general purpose financial statements which could potentially have the effect that all regulatory filings of accounts on a public register are general purpose financial reports. The application of this definition in Australia would have a significant effect on the contents of financial reports of many entities that are required to file their accounts with ASIC.

The AASB also issued the following exposure drafts:

• ED 149 Proposed Amendments to AASB 123 Borrowing Costs
• ED 150 Proposed Amendments to AASB 132 Financial Instruments: Presentation and AASB 101 Presentation of Financial Statements: Financial Instruments Puttable at Fair Value and Obligations Arising on Liquidation.

Consistent with the IFRIC agenda decision, the Urgent Issues Group ('UIG') has issued a rejection statement on subscriber acquisition costs in the telecommunications industry. In Australia, UIG Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry (December 2004) addresses when direct subscriber acquisition costs may be recognised as an asset.

As discussed in the First Quarter update, the AASB have agreed to disband the UIG and adopt a new Interpretations model in Australia under which the AASB will have direct responsibility for interpretations. The Interpretations model includes an Interpretations Agenda Committee (IAC) comprising the AASB Chairman and two other AASB members. The role of the IAC is to consider issue proposals, IFRIC Draft Interpretations and IFRIC Interpretations and recommending a course of action to the AASB. The IAC will work together with advisory panels formed from a public register of potential advisory panel members on a topic-by-topic basis.

The new Interpretations model has effect from 1 July 2006.

Further, the AASB has agreed that all Australian guidance paragraphs that relate to for-profit entities, except those necessary to provide guidance on non-IFRS requirements of the standards, are to be deleted from the Australian Accounting Standards to ensure A-IFRS is consistent with IFRS.

The AASB also issued the following exposure drafts:

• ED 146 Proposed Amendments to AASB 2 Share-based Payment - Vesting Conditions and Cancellations (consistent with IASB ED of Proposed Amendments to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations).
• ED 147 Revenue from Non-Exchange Transactions (Including Taxes and Transfers) (consistent with IFAC ED 29 Revenue from Non-Exchange Transactions (Including Taxes and Transfers)).
• ED 148 Proposed Amendments to AASB 101 Presentation of Financial Statements: A Revised Presentation (consistent with

IASB ED Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation).

The AASB have also agreed to disband the Urgent Issues Group (UIG) and adopt a new Interpretations model in Australia under which the AASB will have direct responsibility for interpretations, with advisory panels formed on a topic-by-topic basis. It is most likely that the new Interpretations model will have effect from 1 July 2006.

The UIG have issued the following new Interpretations:

• UIG Interpretation 7 Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary Economies (consistent with IFRIC Interpretation 7).
• UIG Interpretation 8 Scope of AASB 2 (consistent with IFRIC Interpretation 8).
• UIG Interpretation 9 Reassessment of Embedded Derivatives (consistent with IFRIC Interpretation 9).

The UIG also issued an Invitation to Comment on IFRIC Draft Interpretation D18 Interim Financial Reporting and Impairment.

• AASB 124 Related Party Disclosures - principally revised to include the disclosure requirements previously contained in Australian specific Accounting Standard AASB 1046 Directors and Executive Disclosures by Disclosing Entities, but other amendments have also been made including removal of parent entity relief. AASB 1046 has been withdrawn.
• AAS 25 Financial Reporting by Superannuation Plans - revised to require financial liabilities held by superannuation plans to be measured at net market values with changes being recognised in the profit or loss.
• AASB 1038 Life Insurance Contracts - revised to acknowledge that friendly societies may have unallocated surplus that is in the nature of 'policyholder equity'. Also, certain paragraphs from AASB 1038 were deleted to deal with potential incompatibilities with AASB 127 Consolidated and Separate Financial Statements.
• AASB 1023 General Insurance Contracts - certain paragraphs were deleted to deal with potential incompatibilities with AASB 127 Consolidated and Separate Financial Statements.

The revised Standards are applicable for annual reporting periods ending on or after 31 December 2005.

The AASB also issued its first Interpretation, AASB Interpretation 1002 Post-Date-of-Transition Stapling Arrangements, applicable to annual reporting periods ending on or after 31 December 2005. This Interpretation has the same status as an Urgent Issues Group ('UIG') Interpretation.

The UIG has provided guidance on the following rejected issues:

• Employee Share Loan Plan;
• Capitalised Software; and
• Classification of Long Service Leave Liabilities.

The AASB also made consequential amendments to AASB 4 Insurance Contracts, AASB 1023 General Insurance Contracts, AASB 139 Financial Instruments: Recognition and Measurement, and AASB 132 Financial Instruments: Disclosure and Presentation as a result of the IASB's finalising its proposals on financial guarantee contracts.

In addition, the AASB issued the following Exposure Drafts:

• ED 140 Proposed Amendments to AASB 127 Consolidated and Separate Financial Statements
• ED 141 Proposed Amendments to AASB 137 Provisions, Contingent Liabilities and Contingent Assets
• ED 142 Financial Reporting of General Government Sectors by Governments
• ED 143 Director and Executive Disclosures by Disclosing Entities: Removal of AASB 1046 and Addition to AASB 124.

ED 143 contains proposals relating to the disclosure of transactions with key management personnel (that is, directors and executives) in the financial reports of disclosing entities. ED 143 is expected to be applicable for annual reporting periods ending on or after 31 December 2005 and will result in AASB 124 Related Party Transactions (equivalent to IAS 24) being revised to include specific Australian requirements.

The Urgent Issues Group (UIG) is now issuing Guidance on certain accounting issues on its website (www.aasb.com.au). Guidance will generally on issues that either are not added to the UIG agenda or are removed from its agenda when it is decided that a UIG Interpretation will not be issued. This approach is consistent with the approach adopted by the International Financial Reporting Interpretations Committee (IFRIC).

The following Guidance has been made available on the AASB website:

• Inventory Rebates and Settlement Discounts (based on Proposed UIG Interpretation 1002 which was not approved by the AASB)
• Direct Costs Affecting a Financial Instrument's Effective Interest Rate

Further, the UIG has issued Interpretation 6 Liabilities Arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment in line with IFRIC developments. The Interpretation, applicable to annual reporting periods beginning on or after 1 December 2005, is expected to have limited application in Australia.

Deloitte Australia Welcomes AASB Convergence Proposal

On 10 May 2005, Deloitte Australia issued a News Release (PDF 24k) welcoming the Australian Accounting Standards Board's decision to issue an exposure draft that would fully converge AASB 3 Business Combinations with IFRS 3. Under the AASB proposal, business combinations involving entities under common control would be removed from the scope of AASB 3, as would certain Australian-specific requirements. As a result, common control business combinations will be accounted for in the same manner under AASB 3 and IFRS 3. Deloitte Australia has been a long-term critic of the AASB's scope amendments to IFRS 3 when originally creating the local Australian standard, most recently in this Letter of Comment to the AASB (PDF 509k).

Disclosing the Impacts of Adopting A-IFRSs

In April 2005, the Australian Securities and Investments Commission (ASIC) outlined its expectations about the nature and extent of disclosure required under Australian Accounting Standard AASB 1047 Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards for 30 June 2005 annual financial reports. To help inform users of financial statements about the change to IFRSs, AASB 1047 requires disclosure of:

• any known or reliably estimable information about the quantified impacts on the financial report had it been prepared using IFRSs; or
• if such impacts are not known or reliably estimable, a statement to that effect. In this case AASB 1047, suggests that entities should also update their disclosures made in 2004 about the management of the transition to IFRSs and the explanation of the key differences in accounting policies expected to arise.

A-IFRSs Become Law

In early March 2005, the Australian Parliament, following a recommendation by the Parliamentary Joint Committee on Corporations and Financial Services, did not exercise its power of veto over standards adopted by the Australian Accounting Standards Board (AASB). Therefore, Australian Equivalents to IFRSs (A-IFRSs) became part of the law in Australia effective for annual reporting periods beginning on or after 1 January 2005. This represents the final hurdle for formalisation of the standards in Australia, although IASB and IFRIC developments continue to be incorporated into A-IFRSs.

Other Matters

Consistent with developments internationally, the AASB has amended AASB 119 Employee Benefits to include two additional alternatives for accounting for actuarial gains and losses related to defined benefit plans:

• The corridor approach, which was previously eliminated from the earlier version of AASB 119 (applicable for year ends beginning 1 January 2005); and
• Full recognition directly in retained earnings - a new alternative introduced by the IASB.

The revised AASB 119 will only be operative for annual reporting periods beginning on or after 1 January 2006. However, the revised standard can be early adopted as part of the first-time adoption of A-IFRSs.

The Urgent Issues Group (UIG) has issued two Australian equivalents to IFRIC Interpretations and a domestic Interpretation:

• UIG 2 Members' Shares in c-operative Entities and Similar Instruments - applicable to annual reporting periods ending on or after 31 December 2005.
• UIG 3 Emission Rights - applicable to annual reporting periods ending on or after 28 February 2006.
• UIG 1013 Consolidated Financial Report in Relation to Pre-Date-of-Transition Stapling Arrangements - applicable to annual reporting periods ending on or after 31 December 2005.

Further, the UIG has reached consensus on draft Interpretation UIG 1052 Tax Consolidation Accounting, which is expected to be approved by the UIG at its next meeting in May 2005, effective for annual reporting periods ending on or after 31 December 2005.

• Discussion Paper Adoption of IFRSs Prudential Approach: I Fair Value and Other Issues (PDF 170k)
• Earlier (November 2004) Overview Paper (PDF 71k)

In addition, the AASB has also issued AASB 2004-1 Amendments to Australian Accounting Standards, which contains consequential amendments to Australian equivalents to IFRSs (A-IFRSs) as a result of AASB 6. With the issuance of AASB 6, the AASB has now issued a final set of A-IFRSs that are expected to apply in 2005. Although the Standards have been finalised by the AASB, they are still subject to final approval by the Parliament. The A-IFRSs were tabled in Parliament in August and November 2004, although final approval has not yet been obtained. In December 2004, the Parliamentary Joint Committee on Corporations and Financial Services resolved to review the tabled Standards and is considering:

• whether the A-IFRSs are consistent with the Corporations Act 2001 and its regulations;
• whether the proposed standards will act in furtherance of the objectives of the Act; and
• any related matter.

Depending on the comments received by the Parliamentary Joint Committee, it is possible that further amendments to A-IFRSs or the Corporations Act 2001 will be required.

Further, the AASB has issued an exposure draft ED 138 Concise Financial Reports: Revisions to AASB 1039. The majority of the proposed amendments relate to the adoption of A-IFRSs and amendments to the Corporations Act 2001 as a result of the Corporations Law Economic Reform Program Discussion Paper No. 9 (CLERP 9).

The Urgent Issues Group (UIG) is continuing the process of reviewing existing UIG Abstracts to ensure that they are consistent with the requirements of A-IFRSs. There has been several UIG Abstracts reissued as UIG Interpretations where they are considered to be consistent with A-IFRS and withdrawal of those UIG Abstract that are not considered to be consistent with A-IFRSs. Refer to the AASB website www.aasb.com.au for a summary of the UIG plans for Abstracts in 2005.

Despite the issuance of a final set of A-IFRS, the AASB is currently in the process of reviewing existing Urgent Issues Group Abstracts to ensure consistency with the requirements of A-IFRS. This will ultimately result in the retention of Abstracts that are considered to be consistent with A-IFRS through the issuance of an equivalent UIG Interpretation, and the withdrawal of those that are not consistent with A-IFRS.

Consistent with developments at the IASB, the AASB has also issued the following exposure drafts:

• ED 134 Request for Comments on IASB ED of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 4 Insurance Contracts - Financial Guarantee Contracts and Credit Insurance
• ED 135 Request for Comment on IASB ED of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Cash Flow Hedge Accounting of Forecast Intra-Group Transactions
• ED 136 Request for Comment on IASB ED of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Transition and Initial Recognition of Financial Assets and Financial Liabilities
• ED 137 Request for Comment on IASB ED 7 Financial Instruments: Disclosures

The IASB exposure drafts have been replicated word for word in the Australian exposure drafts. However, proposed amendments have been suggested with respect to ED 137 which would result in additional disclosures in Australia. Parent entity relief from all the disclosure requirements has been proposed in financial reports that include both parent and consolidated financial statements.

Finally, the AASB has issued a revision to AASB 1046 Director and Executive Disclosures by Disclosing Entities. AASB 1046A Amendments to Accounting Standard AASB 1046 effectively aligns the requirements contained in AASB 1046 in relation to the measurement of equity based compensation granted (where market-based performance conditions exists) with those contained in AASB 2 Share Based Payments. AASB 1046A applies to annual reporting periods beginning on or after 1 July 2004 but may be early adopted. It is expected that other amendments will be made in the future to AASB 1046 to further align the requirements of that Standard with AASB 2.

This process completes the Financial Reporting Council's Year 2005 strategy which required those IASB Standards on issue at 31 March 2004 to be adopted in Australia from 1 January 2005. As a result, it is likely that the finalisation of exposure drafts subsequent to March will only be applicable from a later date, even if applicable from 1 January 2005 at an IASB level, but early adoption will be permitted in order for an Australian entity to be able to simultaneously claim compliance with both Australian GAAP and IFRS from 1 January 2005. The ability to early adopt is particularly relevant to any Standard resulting from ED 130 Request for Comment on IASB ED 6 Exploration for and Evaluation of Mineral Resources, which is important for the mining industry in Australia.

The finalisation of all the Standards and Interpretations will assist entities in the ability to comply with the recently issued AASB 1047 Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards. AASB 1047 requires disclosure, in annual and interim financial reports issued before first-time adoption of Australian equivalents to IFRS, of information relating to the transition to Australian equivalents to IFRS. The Standard requires narrative disclosure as at 30 June 2004 with increased quantitative disclosure of known or reliably estimable impacts in 30 June 2005 financial reports. As at 30 June 2004 such disclosures will include an explanation of how the transition to Australian equivalents to IFRS is being managed and a narrative explanation of the key differences in accounting policies that are expected to arise from adopting Australian equivalents to IFRS.

Finally, consistent with developments at the IASB, the AASB has issued the following exposure drafts:

• ED 131 Request for Comment on IASB ED Proposed Amendments to IAS 19 Employee Benefits: Actuarial Gains and Losses, Group Plans and Disclosures;
• ED 132 Request for Comment on IASB ED Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement - The Fair Value Option; and
• ED 133 Request for Comment on IASB ED of Proposed Amendments to IFRS 3 Business Combinations - Combinations by Contract Alone or Involving Mutual Entities.

Contrary to the above FRC strategy, the AASB is proposing that ED 133 will be applicable from 1 January 2005 due to the complexities surrounding first-time adoption and the ability in future periods to make an explicit and unreserved statement of compliance with IFRS.

• Pending AASB 114 Segment Reporting is applicable to all for-profit entities including those entities that do not have publicly traded equity or debt securities and/or are not in the process of issuing securities in publicly traded markets.
• Pending AASB 119 Employee Benefits does not permit the "corridor approach" for the recognition of actuarial gains and losses on defined benefit plans. Instead, all actuarial gains and losses will need to be recognised in the period they arise.
• Pending AASB 131 Interest in Joint Ventures requires a venturer to measure its interest in a jointly controlled entity by applying the equity method. A venturer is not permitted to proportionately consolidate its interest in a jointly controlled entity.

As AASB Standards are applicable to all entities, some of the Pending AASB Standards contain specific requirements that are applicable only to not-for-profit entities. Such requirements will result in certain not-for-profit entities not being able to claim compliance with IFRS.

Further, several of the Pending AASB Standards approved contain additional disclosure requirements compared to what is required in the equivalent IFRS. The additional disclosures generally relate to information that is currently required to be disclosed under existing Australian Accounting Standards.

The Pending AASB Standards will only be issued as AASB Standards when all IFRS converged AASB Standards are finalised and will only be able to be adopted when all IFRS converged AASB Standards are adopted for annual reporting periods commencing on or after 1 January 2005. This is expected to occur in June 2004.

The AASB has also released ED 130 Request for Comment on IASB ED 6 Exploration for and Evaluation of Mineral Resources.

• Pending AASB 107, Cash Flow Statements
• Pending AASB 110, Events After the Balance Sheet Date
• Pending AASB 121, The Effects of Changes in Foreign Exchange Rates
• Pending AASB 123, Borrowing Costs
• Pending AASB 141, Agriculture.

The Pending Standards are largely consistent with the equivalent International Accounting Standards except Pending AASB 107 does not permit entities to present their statement of cash flows using the indirect method, as permitted under IAS 7, Cash Flow Statements. The Pending Standards will only be issued as AASB Standards when all IFRS converged Australian Standards expected to be applicable in 2005 are finalised. This is expected to occur in April/May 2004.

The following Exposure Drafts have also been issued by the AASB in line with the AASB's strategy of adoption of IFRS as equivalent AASB Standards:

• ED 124, Request for Comment on:
  • The Definition of Reporting Entity
  • IASB Framework for the Preparation and Presentation of Financial Statements
  • IAS 18, Revenue
  • IAS 20, Accounting for Government Grants and Disclosure of Government Assistance
• ED 126, Request for Comment on IAS 34, Interim Financial Reporting
• ED 127, Request for Comment on IAS 37, Provisions, Contingent Liabilities and Contingent Assets
• ED 128, Request for Comment on IAS 12, Income Taxes.

The AASB has also released:

• ED 125 Financial Reporting by Local Governments
• ED 129 Disclosing the Impact of Adopting AASB Equivalents to IASB Standards. The AASB has decided to fast-track this ED so that entities will be required to disclose the impact of adopting IFRS converged AASB Standards in annual and half-year financial reports ending on or after 30 June 2004.

The Urgent Issues Group, a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Standards. The UIG has approved a revised version of Abstract 52, Income Tax Accounting under the Tax Consolidation System. This is currently subject to AASB veto.

In line with the AASB's strategy of adoption of IFRS as equivalent AASB Standards, several Exposure Drafts have recently been issued:

• ED 115, Request for Comments on IAS 19 Employee Benefits
• ED 116, Request for Comments on IAS 2 and IPSAS 12 Inventories
• ED 117, Request for Comments on IASB ED 4 Disposal of Non-Current Assets and Presentation of Discontinued Operations
• ED 118, Request for Comments on IAS 11 Construction Contracts
• ED 119, Request for Comments on IAS 14 Segment Reporting
• ED 120, Request for Comments on IAS 16 and IPSAS 17 Property, Plant and Equipment
• ED 121, Request for Comments on IAS 31 Financial Reporting of Interests in Joint Ventures
• ED 122, Requests for Comments on IASB ED 5 Insurance Contracts
• ED 123, Request for Comment on IASB ED of Proposed Amendments to IAS 39 Financial Instruments: Recognition and Measurement - Fair Value Hedge Accounting for a Portfolio Hedge of Interest Rate Risk

Whilst it is intended that the new/revised AASB Standards will converge with IFRS, converged AASB Standards will differ from the corresponding IFRS for the following reasons:

• Wordings will be amended to accommodate the Australian legislative environment, for example, reference to the Corporations Act 2001 in the application paragraph.
• Additional text will be included in the standards for not-for-profit entities.
• In some cases the AASB may permit only one of a number of options available in the corresponding IFRS.
• The AASB may require additional disclosures, particularly where these disclosures are already required under existing AASB standards.

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG has issued Abstract 54, Defined Benefit Superannuation Disclosures by Employers.

• ED 110, Request for Comment on IAS 7 Cash Flow Statements
• ED 111, Request for Comment on IAS 23 Borrowing Costs
• ED 112, Request for Comment on IAS 29 Financial Reporting in Hyperinflationary Economies
• ED 113, Request for Comment on IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions
• ED 114, Request for Comment on IAS 41 Agriculture

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG has issued the following Abstracts:

• Revised Abstract 52, Income Tax Accounting Under the Tax Consolidation System
• Abstract 53, Pre-Completion Contracts for the Sale of Residential Development Properties

In addition, the AASB recently issued the following Exposure Drafts:

• Exposure Draft ED 108, Request for Comment on IASB ED 2, Share-based Payment.
• Exposure Draft ED 109, Request for Comment on:
  
  • IASB ED 3, Business Combinations,
  • IASB ED of Proposed Amendments to IAS 36, Impairment of Assets, and IAS 38, Intangible Assets, and
  • AASB added material.

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG has agreed on the following Consensuses, which will be subject to veto by the AASB:

• Recovery of Unfunded Superannuation of Universities (Proposed Abstract 51).
• Income Tax Accounting Under the Tax Consolidation System (Proposed Abstract 52).

The UIG has also agreed on a Proposed Appendix 3, Implementation Guidance under the 1989 Standard, for Abstract 39, Effect of Proposed Tax Consolidation Legislation on Deferred Tax Balances. This guidance addresses the scope of potential adjustments to deferred tax balances as a result of the implementation of the tax consolidation regime.

Whilst the Australian Accounting Standards Board (AASB) did not issued any final accounting standards or other pronouncements since the last IAS Plus newsletter, it did issue the following Exposure Draft and Invitation to Comment:

• Exposure Draft ED 107, Request for Comment on IASB ED 1 First-time Application of International Financial Reporting Standards.
• Invitation to Comment on Proposed Improvements to International Accounting Standards IAS 32, Financial Instruments: Disclosure and Presentation, and IAS 39, Financial Instruments: Recognition and Measurement.

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG issued:

• Abstract 47, Professional Indemnity Claims Liabilities in Medical Defence Organisations.
• Abstract 48, Status of Tax Consolidation Legislation.
• Abstract 49, Revenue - Barter Transactions involving Advertising Services.
• Abstract 50, Evaluating the Substance of Transactions involving the Legal Form of a Lease.

Until that happens, the Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with International Accounting Standards.

The following highlights the key developments in accounting standard-setting since the last publication of IAS Plus:

• In May 2002, the AASB agreed to defer the application of AASB 1020/AAS 3, Income Taxes, to reporting periods beginning on or after 1 July 2003. Those standards were originally operative for reporting periods beginning on or after 1 July 2002. The deferral was driven mainly by complexities that may arise as a result of implementation of the proposed tax consolidation regime in Australia.
• In May 2002, the AASB approved minor amendments to AASB 1039, Concise Financial Reports. The amendments were made to ensure that the disclosure requirements of AASB 1039 are consistent with the requirements of the revised AASB 1005, Segment Reporting, and AASB 1027, Earnings per Share.
• In June 2002, the AASB approved revisions to AASB 1018, Statement of Financial Performance. The revised AASB 1018:
  • requires that sub-totals other than those specified in the Standard be presented less prominently than the specified sub-totals, and that a sub-total should not be presented immediately before the disclosure of 'significant items';
  • clarifies that the provisions of AASB 1031 and AAS 5, Materiality, apply to the classification of expenses by nature or by function, that is, that unclassified expenses (commonly the 'other' category on an entity's statement of financial performance) is unlikely to exceed 10% of an entity's total expenses;
  • clarifies that expenses must be disclosed either all by nature or all by function; and that
    --this disclosure may be made either all in the notes to the financial report or all on the face of the statement of financial performance; and
    --if this disclosure is made in the notes to the financial report, it must be reconciled to the expenses shown on the face of the statement of financial performance; and
  • specifies that revenues and expenses disclosed under paragraph 5.4 (so-called 'significant items') may be disclosed on the face of the statement of financial performance or in the notes to the financial report.

The Urgent Issues Group (UIG), a subcommittee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG issued:

• UIG Abstract 45, Subsidiary becomes a Joint Venture Entity or Associate.
• UIG Abstract 46, Initial Foreign Currency Translation for Redomiciled Entities.

The AASB has not issued any new/revised authoritative pronouncements since the last IAS Plus newsletter. However, one of the key developments since then is that the AASB has developed a draft Exposure Draft proposing amendments to AASB 1018, Statement of Financial Performance, AASB 1034, Financial Report Presentation and Disclosures, and AASB 1040, Statement of Financial Position (the Trilogy). It is expected that the proposed amendments will be effective for reporting periods ending on or after 30 June 2002.

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG issued Abstract 44, Acquisition of In-Process Research and Development. This Abstract addresses the recognition of in-process research and development acquired as part of an acquisition of an entity or operation.

In October 2001, the Board issued AASB 1044, Provisions, Contingent Liabilities and Contingent Assets. This standard will be operative for annual reporting periods beginning on or after 1 July 2002. AASB 1044 harmonises with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, and relevant sections of IAS 22, Business Combinations, and IAS 10, Events After the Balance Sheet Date.

The main requirements of AASB 1044 include:

• Provisions can be recognised when and only when it is probable that a future sacrifice of economic benefits will be required and the amount of the provision can be reliably measured.
• Contingent assets and contingent liabilities must not be recognised in the statement of financial position.
• Estimated cash flows used to measure provisions, recoveries, receivables, contingent assets, and contingent liabilities must be discounted to their present value.
• The discount rate in measuring the present value of provisions must be a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the liability.
• Future operating losses cannot be provided for.
• Liabilities must be recognised for the entire amount of dividends declared, determined, or publicly recommended that remain undistributed at the reporting date.
• Dividends that have not been declared, determined, or publicly recommended should not be recognised as a liability.

The AASB issued Exposure Draft 103, Investment Property (and Consequential Amendments to AASB 1021/AAS 4 and AASB 1041), in November 2001. The exposure draft contains proposals in relation to the definition, measurement, recognition, and disclosure of investment properties. It is mainly based on the requirements of IAS 40, Investment Property, and SIC Interpretation 15, Operating Leases - Incentives.

The Urgent Issues Group (UIG), a subcommittee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. Since the last IAS Plus newsletter, the UIG issued:

• UIG Abstract 40, Non-reciprocal Transfers Within an Economic Entity for Monetary or No Consideration.
• UIG Abstract 41, Fair Value of Equity Instruments Issued as Purchase Consideration.
• UIG Abstract 42, Subscriber Acquisition Costs in the Telecommunications Industry.
• UIG Abstract 43, Classification of Financial Instruments with Conversion Options.

In July 2001, the AASB issued a revised AASB 1041, Revaluation of Non-current Assets. The revised AASB 1041 supersedes AASB 1041/AAS 38 Revaluation of Non-current Assets (issued in December 1999). The revised standard applies to annual reporting periods ending on or after 31 September 2001.

AASB 1041 has been reissued to deal with implementation issues relating to the superseded AASB 1041/AAS 38. The key changes in the revised standard are:

• The revised standard limits the requirement to disclose reconciliations of the carrying amount at the beginning and end of a reporting period to property, plant and equipment instead of all non-current assets.
• The revised standard allows entities to revert from the cost basis to the fair value basis or to discontinue applying the fair value basis, if such a change satisfies the requirements of AASB 1001/AAS 6, Accounting Policies. AASB 1001/AAS 6 permits a voluntary change in accounting policy if it results in an overall improvement to the relevance and reliability of financial information.

• UIG Abstract 39, Effect of Tax Consolidation Proposals on Deferred Tax Balances. In addition, the UIG has agreed on a consensus relating to the fair value of equity instruments issued as purchase consideration. The Consensus will be subject to veto by the AASB at its meeting on 27 September 2001.

• Provisions and Contingencies (IAS 37)
• Impairment of Assets (IAS 36)
• Provision of Public Sector Infrastructure by Other Entities (this project deals with accounting for build, own and operate, and, build, own, operate, and transfer infrastructure arrangements)

The AASB has also issued ED 102, International Convergence and Harmonisation policy, which proposes revisions to Policy Statement 4, Australia - New Zealand Harmonisation Policy, and Policy Statement 6, International Harmonisation Policy.

• Revised AASB 1027, Earnings Per Share, which applies to annual reporting periods beginning on or after 1 July 2001. The revised Standard replaces the October 2000 version of AASB 1027. The Standard was revised to ensure that potential ordinary shares are treated consistently regardless of whether they are classified as debt or equity, and to clarify the application of the notion of shares issued for no consideration to potential ordinary shares. (IAS 33).
• Revised AASB 1028, Employee Benefits, which applies to annual reporting periods beginning on or after 1 July 2002. The revised Standard supersedes AASB 1028/AAS 30, Accounting for Employee Entitlements. (IAS 19)

Standards issued by the AASB as part of the harmonisation program do not necessarily conform to the IAS in every respect.

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. The UIG is responsible for reviewing SIC Interpretations to determine whether they should apply to Australian reporting entities. The following final Abstracts have been issued since the last IAS Plus newsletter:

• UIG 37, Accounting for Website Costs.
• UIG 38, Contributions by Owners Made to Wholly-Owned Public Sector Entities.

• Provisions and Contingencies (IAS 37)
• Impairment of Assets (IAS 36)
• Provision of Public Sector Infrastructure by Other Entities (this project deals with accounting for build-own-operate and build-own-operate-transfer infrastructure arrangements)
• Revaluation of Non-Current Assets (this exposure draft contains proposed amendments to AASB 1041/AAS 38, Revaluation of Non-Current Assets, to address issues arising from the implementation of these standards). (IAS 16)

• Related Party Disclosures (IAS 24)
• Director and Executive Disclosures
• Investment Properties (IAS 40)
• Post-employment Benefits (IAS 19)
• Glossary of Definitions

Corporations Act 2001

On 15 July 2001, a new Corporations Act 2001 and associated acts came into force and replaced the old Corporations Law. While changes to the content of the law were relatively minor, there will be an impact on financial reporting. All documents prepared and lodged from 15 July 2001 should refer to the "Corporations Act 2001", rather than the "Corporations Law". In annual financial reports, this will impact such items as:

• the directors' report and directors' declaration
• the audit report
• accounting policy note
• lodgement of forms and documents with ASIC

• AASB 1010 (revised), Recoverable Amount of Non-Current Assets (IAS 36)
• AASB 1015 (revised), Acquisition of Assets (IAS 22)
• AASB 1018 (revised), Statement of Financial Performance
• AASB 1033 (revised), Presentation and Disclosure of Financial Instruments (IAS 32 and IAS 39)
• AASB 1034 (revised), Financial Report Presentation and Disclosure (IAS 1)
• AASB 1037, Self-Generating and Regenerating Assets
• AASB 1040, Statement of Financial Position (IAS 1)
• AASB 1041, Revaluation of Non-Current Assets (IAS 16)
• AASB 1043, Changes to the Application of AASB and AAS Standards and Other Amendments

AASB 1043 is issued to amend the application of AASB and AAS Standards and to specify that entities need not comply with requirements of certain AASB and AAS Standards in preparing interim financial reports. Hence, AASB 1043 does not have an IAS equivalent.

Standards issued by the AASB as part of the harmonisation program do not necessarily conform to the equivalent IAS in every respect.

The AASB has not issued any new AASB Standards since the last issue of IAS Plus other than AASB 1043, Changes to the Application of AASB and AAS Standards and Other Amendments, which applies to annual reporting periods and interim reporting periods ending on or after 31 December 2000.

The Urgent Issues Group (UIG), a sub-committee of the AASB, reviews accounting issues that are likely to receive divergent or unacceptable treatment with a view to reaching a consensus as to the appropriate accounting treatment. The UIG is also responsible for reviewing SIC Interpretations to determine whether they should apply to Australian reporting entities. Abstracts issued since the last issue IAS Plus are as follows:

• UIG Abstract 37, Accounting for Website Costs
• UIG Abstract 38, Contributions by Owners Made to Wholly-Owned Public Sector Entities

Outstanding AASB exposure drafts, currently being considered for issue as Standards, are as follows:

• Provisions and Contingencies (IAS 37)
• Employee Benefits (IAS 19)
• Impairment of Assets (IAS 36)
• Amendments to AASB 1041 and AAS 38 Revaluation of Non-Current Assets
• Provision of Public Sector Infrastructure by Other Entities (this project deals with accounting for build, own, operate and build, own, operate and transfer infrastructure arrangements)

Other projects on which the AASB is expected to issue Exposure Drafts in the next twelve months include:

• Related Party Disclosures
• Director and Executive Disclosures
• Investment Properties
• Post-Employment Benefits
• Glossary of Definitions

The AASB is currently working on a series of issues paper for public comment on accounting for intangible assets.

The AASB has recently reissued the following accounting standards as part of the harmonisation program:

• AASB 1012 (revised), Foreign Currency Translation (applies to annual reporting periods beginning on or after 1 January 2002) (IAS 19)
• AASB 1027 (revised), Earnings per Share (applies to annual reporting periods beginning on or after 1 July 2001) (IAS 33)
• AASB 1029 (revised), Interim Financial Reporting (applies to annual reporting periods beginning on or after 1 July 2001) (IAS 34)

Standards issued by the AASB as part of the harmonisation program do not necessarily conform to the IAS in every respect.

The Urgent Issues Group (UIG), a sub-committee of the AASB, issues Abstracts that give interpretations of existing AASB Accounting Standards. The UIG is also responsible for reviewing SIC Interpretations to determine whether they should apply to Australian reporting entities. The following final Abstracts have recently been issued:

• UIG 15 (revised), Early Termination of Foreign Currency Hedges
• UIG 18 (revised), Early Termination of Gold Hedges
• UIG 25 (revised), Redesignation of Hedges
• UIG 29 (revised), Early Termination of Interest Rate Swaps
• UIG 32 (revised), Designation as Hedges - Rollover Strategies
• UIG 36, Non-Monetary Contributions Establishing a Joint Venture Entity

The AASB has issued a number of exposure drafts, which are currently being considered for issue as Standards. The topics of those exposure drafts are:

• Provisions and Contingencies (IAS 37)
• Employee Benefits (IAS 19)
• Impairment of Assets (IAS 36)
• Provision of Public Sector Infrastructure by Other Entities (this project deals with accounting for build, own, operate and build, own, operate, transfer infrastructure arrangements)

Other projects on which the AASB is expected to issue Exposure Drafts in the next twelve months are:

• Related Party Disclosures (IAS 24)
• Director and Executive Disclosures
• Consolidation (IAS 27)
• Investment Properties (IAS 40)

The AASB has recently commenced a project on accounting for intangible assets.

For 30 June 2000 year-ends, the following Standards came into effect (their equivalent IAS is indicated for reference):

• AASB 1001 (revised), Accounting Policies (IAS 1 & IAS 8)
• AASB 1006 (revised), Interests in Joint Ventures (IAS 31)
• AASB 1008 (revised), Leases (IAS 17)
• AASB 1019 (revised), Inventories (IAS 2)
• AASB 1038, Life Insurance Business

In addition the following Standards have been issued but are not yet applicable:

• AASB 1005 (revised), Segment Reporting (applies to annual reporting periods beginning on or after 1 July 2001) (IAS 14)
• AASB 1010 (revised), Recoverable Amount of Non-Current Assets (applies to reporting periods beginning on or after 1 July 2000) (IAS 36)
• AASB 1015 (revised), Acquisitions of Assets (applies to half-years ending on or after 30 June 2000, and financial years beginning on or after 31 December 2000) (IAS 22)
• AASB 1018 (revised), Statement of Financial Performance (applies to half-years ending on or after 31 December 2000 and financial years ending on or after 30 June 2001) (IAS 1 and IAS 8)
• AASB 1020 (revised), Income Taxes (applies to half-years ending on or after 31 December 2002 and financial years ending on or after 30 June 2003) (IAS 12)
• AASB 1033 (revised), Presentation and Disclosure of Financial Instruments (applies to half-years ending on or after 30 June 2000 and financial years ending on or after 31 December 2000) (IAS 32 and IAS 39)
• AASB 1034 (revised), Financial Report Presentation and Disclosure (applies to half-years ending on or after 31 December 2000 and financial years ending on or after 30 June 2001) (IAS 1)
• AASB 1037, Self-Generating and Regenerating Assets (applies to financial years ending on or after 30 June 2001) (E65)
• AASB 1040, Statement of Financial Position (applies to half-years ending on or after 31 December 2000 and financial years ending on or after 30 June 2001) (IAS 1)
• AASB 1041, Revaluation of Non-Current Assets (applies to financial years beginning on or after 1 July 2000) (IAS 16)
• AASB 1042, Discontinuing Operations (applies to annual reporting periods beginning on or after 1 July 2001) (IAS 35)

The Urgent Issues Group (UIG), a sub-committee of the AASB issues Abstracts which give interpretations of existing AASB Accounting Standards. The UIG is also responsible for reviewing SIC Interpretations to determine whether they should apply to Australian reporting entities. Abstracts issued in 2000 are as follows

• UIG 13 (revised), The Presentation of the Financial Report of Entities whose Securities are Stapled
• UIG 23 (revised), Transaction Costs Arising on the Issue of Equity Instruments
• UIG 30, Depreciation of Long-Lived Physical Assets, including Infrastructure Assets: Condition-Based Depreciation and Other Related Methods
• UIG 31, Accounting for the Goods and Services Tax (GST)
• UIG 32, Designation as Hedges - Rollover Strategies
• UIG 33, Hedges of Anticipated Purchases and Sales
• UIG 34, Acquisitions and Goodwill - First Time Application of Accounting Standards
• UIG 35, Disclosure of Contingent Liabilities

• Earnings Per Share (IAS 33)
• Foreign Currency Translation (IAS 21)
• Provisions and Contingencies (IAS 37)
• Interim Financial Reporting (IAS 34)
• Employee Benefits (IAS 19)
• Impairment of Assets (IAS 36)
• Provision of Public Sector Infrastructure by Other Entities (this project deals with accounting for build, own, operate and build, own, operate, transfer infrastructure arrangements)

Other projects on which the AASB is expected to issue Exposure Drafts in the next twelve months are

• Related Party Disclosures
• Director and Executive Disclosures
• Consolidation
• Investment Properties

The AASB has recently commenced a project on accounting for intangible assets.