Home   Site Map   Standards   Interpretations   Agenda   Structure   Newsletter   Resources   Jurisdictions   Links   Search

Australia 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 Update for April 2008 Update for February 2008 Update for January 2008 Update for June 2007 Update for April 2007 Update for February 2007 Update for December 2006 Update for October 2006 Update for July 2006 Update for April 2006 Update for January 2006 Update for November 2005 Update for May 2005 Update for April 2005 Update for February 2005 Update for January 2005 Update for October 2004 Update for July 2004 Update for April 2004 Update for January 2004 Update for October 2003 Update for July 2003 Update for January 2003 Update for October 2002 Update for July 2002 Update for April 2002 Update for January 2002 Update for October 2001 Update for July 2001 Update for April 2001 Update for January 2001 Update for October 2000 Melbourne: Sydney: Australia Accounting Alerts Deloitte (Austraila) publishes a series of Accounting Alerts to keep clients up-to-date on new financial reporting pronouncements, emerging issues, and uncertainties in interpretation. Up through June 2006, the Alerts were published as PDF files. Starting in July 2006, the Alerts have been published on-line, some as PDFs and some as web pages. Click to go to our Page of Australia Accounting Alerts, which has links to view all of the on-line Alerts and to download the earlier PDF Alerts. Illustrative Financial Reports for 2008 These lllustrative financial reports for 2008 include complete illustrative disclosures for companies with annual reporting obligations at 30 June 2008, including new requirements such as AASB 7 Financial Instruments: Disclosures. In addition to providing illustrative disclosures, these publications also provide commentary on the application of the pronouncements to assist in the efficient preparation of a value added report. This publication illustrates the amendments to s300A of the Corporations Act 2001 relating to remuneration reports, and in Section A discusses changes to the ASX corporate governance principles and recommendations as released during August 2007. In addition to these changes there are further changes afoot with revised versions of IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements released by the International Accounting Standards Board in January 2008 with their Australian equivalents approved for for-profit entities by the Australian Accounting Standards Board in March 2008. We have included commentary on these and other changes in this publication’s section A What’s New in Financial Reporting?. Click to download: What's new in financial reporting? (Section A) (PDF 640k) Illustrative Annual Report (Section B) (PDF 1,970k) Illustrative Concise Report (Section C) (PDF 767k) Reporting Obligations (Section D) (PDF 443k) Model Financial Reports for 2007 Deloitte (Australia) has published 2007 Special Purpose Model Annual Report. This model annual report illustrates the minimum disclosure requirements of a proprietary company's special purpose financial report as of 30 June 2007 prepared in accordance with: the provisions of the Corporations Act 2001 Accounting Standards and Interpretations issued by the Australian Accounting Standards Board up to 1 March 2007 (A-IFRSs) other requirements and guidelines current as at the date of issue, including Australian Securities and Investments Commission (ASIC) Class Orders, Practice Notes, Policy Statements and Media Releases. The publication comprises two documents: Special Purpose Model Annual Report Section A (PDF 908k) – new and revised accounting pronouncements, reporting deadlines and other useful information Special Purpose Model Annual Report Section B (PDF 1,095k) – an illustrative special purpose model annual report. Discussion Paper on Accounting for Business Combinations In September 2004, Deloitte (Australia) published the second in their new series of Discussion Papers on Australian equivalents to International Financial Reporting Standards ('A-IFRSs'): Business Combinations: Insights for Australian Entities (PDF 1,088k). The objective of this Discussion Paper is to provide an Australian perspective on the significant convergence areas of business combinations, intangibles, and impairment. The new and modified concepts and procedures for Australian entities are highlighted and crossed referenced to the Deloitte global publications Business Combinations: A guide to IFRS 3 (PDF 1,894) and First-time Adoption – A Guide to IFRS 1 (PDF 2,506k). Board-level Overview of Australian Equivalents to IFRSs In July 2004, Deloitte (Australia) released a new Discussion Paper: An Overview of Australian Equivalents to IFRS – A Guide for Boards and Audit Committees. With the final versions of the Australian equivalents to International Financial Reporting Standards (A-IFRSs) having been issued by the Australian Accounting Standards Board in July 2004, this publication is designed to assist boards and audit committees to quickly come to terms with the requirements of A-IFRSs and their immediate impacts on current financial reporting. The guide also includes a number of key questions that boards and audit committees can use to assess preparedness for the transition to A-IFRSs, as well as examples of the narrative disclosures that might be appropriate for disclosing the impact of adopting A-IFRSs. Click to Download the Discussion Paper (PDF 4,021k*, 59 pages). Because A-IFRSs are virtually identical to IFRSs, this publication is likely to be useful globally, not just in Australia. *Because of the large file size, a white screen may appear for a while when downloading. Differences Between Australian Standards and IFRSs – September 2005 A-IFRS vs IFRS (PDF 244k) details the differences between Australian equivalents to International Financial Reporting Standards (A-IFRS) and International Financial Reporting Standards (IFRS) as of September 2005. As the Australian Accounting Standards Board considered the issuance of IFRS in Australia, several amendments were made to the finalised A-IFRS, including the removal of certain options permitted under IFRS, the inclusion of additional implementation guidance, and other minor wording changes. As a result of these changes, the choices available and some of the implementation considerations encountered by Australian entities will differ somewhat compared to their international counterparts, despite the fact that Australian companies applying A-IFRS will generally be able to make an unreserved statement of compliance with IFRS. Differences Between Current Australian GAAP and Australian Equivalents to IFRS In June 2004, the Australian Accounting Standards Board issued 40 new or revised accounting standards applicable for all financial years beginning on or after 1 January 2005. Early adoption of the standards is not permitted. Those standards – sometimes referred to as Australian equivalents to International Financial Reporting Standards (A-IFRSs) – will result in some significant changes as compared to practice under current Australian GAAP. In August 2004, Deloitte (Australia) published a 24-page booklet explaining the major Differences Between Current Australian GAAP and Australian Equivalents to IFRS (PDF 2,089k). None of the new A-IFRSs is 100% compatible with the corresponding IFRS for the following reasons: Wording has been amended to accommodate the Australian legislative environment, for example, reference to the Corporations Act 2001 in the application paragraphs. Additional or amended requirements for not-for-profit entities. In some cases the AASB has permitted only one of a number of options available in the corresponding IFRS. Additional disclosures. April 2008 Update 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. February 2008 Update 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. January 2008 Update 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. June 2007 Update 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. April 2007 Update In the first quarter of 2007 the Australian Accounting Standards Board (AASB) continued its discussion on differential reporting and SMEs. At its March meeting the AASB confirmed that a two-tier approach should apply to the corporate reporting sector and that all financial reports that are lodged with the Australian regulator, the Australian Securities and Investments Commission, are to be considered general purpose financial reports for the purposes of the forthcoming exposure draft (ED) on an Australian SME Standard. 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). February 2007 Update In October 2006, the AASB revised AASB 101 Presentation of Financial Statements as part of its initiative to eliminate differences between A-IFRSs and IFRSs. The revised Standard is applicable to annual reporting periods beginning on or after 1 January 2007, but early adoption is permitted. 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. December 2006 Update 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. Options in accounting and disclosure ED 151 proposes to allow entities the option to: prepare cash flow statements using the 'indirect' method. Whichever method adopted, the reconciliation between profit and operating cash flows will no longer be required 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 a 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 Reducing the magnitude of additional disclosures ED 151 also proposes that entities no longer be required to make Australian specific disclosures relating to: defined benefit plans, including the surplus or deficit determined under AAS 25 Accounting for Superannuation Plans and details about funding associates and joint ventures earnings per share calculations, including disclosure of an additional EPS number where there has been a major capital restructuring. the reason and justification for not using the Australian currency as the presentation currency the financial effect of a change in accounting policy made in the second half of the financial year on the previously reported half-year results/position interim financial reporting – including the financial effect of subsequent events, details about dividends proposed or declared, and labelling of the interim financial report for biological assets, their nature, estimate of physical quantity and details of restrictions on their use or sale disclosure of credit standby arrangements and a summary of used and unused loan facilities as required by AASB 132 Financial Instruments: Disclosure and Presentation for financial institutions, disclosures including interest analysis, contractual maturities, impairment losses and fiduciary duties. Click for Deloitte Accounting Alert (PDF 41k). October 2006 Update In July 2006 the Financial Reporting Council (FRC) released the Simpkins Report, a review of the policy of sector-neutral accounting standard-setting in Australia. The report will assist the FRC in considering possible modifications to its strategic direction to the Australian Accounting Standards Board (AASB), especially in relation to the public sector and the other not-for-profit sectors. 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. July 2006 Update The Australian Accounting Standards Board ('AASB') began their deliberations on the removal of Australian Guidance attached to Australian equivalents to IFRSs and agreed that most of it should be removed, either because it is no longer relevant or because it may be misinterpreted in the context of seeking compliance with IFRS. Also, preliminary discussions have been held which may 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. 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. April 2006 Update The Australian Accounting Standards Board ('AASB') revised AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards to permit access to AASB 1 for not-for-profit public sector entities in rare and exceptional circumstances where they experienced extreme difficulties in complying with certain Australian equivalents to IFRSs (A-IFRS) due to information deficiencies. The revised Standard applies to annual reporting periods ending on or after 30 June 2006 with early adoption permitted for annual reporting periods beginning on or after 1 January 2005. 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. January 2006 Update In December 2005, the Australian Accounting Standards Board ('AASB') revised the following Accounting Standards: 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. November 2005 Update In September 2005, the Australian Accounting Standards Board (AASB) issued AASB 7 Financial Instruments: Disclosures in line with IFRS 7 of the same title. The requirements of AASB 7 will be applicable for annual reporting periods beginning on or after 1 January 2007. 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. May 2005 Update 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). April 2005 Update 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. To the extent that an entity knows or is able to reliably estimate the quantitative impact of some, but not all of the key accounting policy changes, ASIC believes that disclosure should comprise the quantified impacts of those accounting policy changes that can be reliably estimated and a narrative explanation of any unquantifiable items. Click to download The ASIC Announcement (PDF 37k). 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. February 2005: APRA Announcement: On 24 February 2005, the Australian Prudential Regulation Authority released the first of two discussion papers setting out its proposed regulatory response to the adoption of International Financial Reporting Standards by APRA-regulated institutions. APRA is the prudential regulator of the Australian financial services industry. It oversees banks, credit unions, building societies, and insurance companies, among others. Australia has adopted national GAAP that starting in 2005 is virtually equivalent to IFRSs. The APRA noted that its objective is to "align its prudential and reporting standards with Australian accounting standards and principles to the extent practicable.... In certain circumstances, however, APRA's prudential framework will depart from accounting standards." Among the areas of departure cited in the discussion paper are: Fair value measurement Non-accrual loans and deferred acquisition costs Treatment of hedges Available for sale financial assets Property Excess of market value over net assets Loan loss provisioning Defined benefit pension plans APRA also states that it will wait until after implementation of A-IFRSs to assess other areas, including leases, impairment, business combinations, share-based payment, joint ventures, and provisions. Click to download: Discussion Paper Adoption of IFRSs Prudential Approach: I Fair Value and Other Issues (PDF 170k) Earlier (November 2004) Overview Paper (PDF 71k) January 2005 Update In December 2004, the Australian Accounting Standards Board (AASB) issued Accounting Standard AASB 6 Exploration for and Evaluation of Mineral Resources (Australian equivalent to IFRS 6), as part of Australia's convergence with IFRSs. AASB 6 applies to reporting periods ending on or after 1 January 2005 and cannot be early adopted. 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. October 2004 Update At its meeting in July 2004, the Australian Accounting Standards Board (AASB) formally made effective all the Standards and Interpretations that form the Australian equivalents to International Financial Reporting Standards (A-IFRS) that will apply from 2005 and cannot be early adopted prior to this point in time. A-IFRS are currently based on IFRS as at 31 March 2004, with subsequent changes only expected to be implemented post 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. July 2004 Update On 30 June 2004, the Australian Accounting Standards Board (AASB) announced that it had finalised the Pending versions of all Standards and Interpretations that are equivalent to IFRS. The AASB intends to formally make the Standards at its next meeting on 15 July 2004. It is expected that 35 Australian equivalents to IFRS, 12 Australian equivalents to IASB Interpretations, an Australian equivalent to the IASB Framework, 4 revised AASB Standards and 1 new AASB Standard to facilitate Year 2005 implementation will be approved at this meeting. 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. April 2004 Update The Australian Accounting Standards Board (AASB) has approved numerous Pending AASB Standards since January 2004 including those relating to first-time adoption and share-based payments, as part of Australia's convergence with International Financial Reporting Standards (IFRS). The Pending AASB Standards approved are generally consistent with the equivalent IFRS except for the following differences: 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. January 2004 Update The Australian Accounting Standards Board (AASB) has approved five Pending Standards as part of Australia's convergence with International Financial Reporting Standards (IFRS). The Pending Standards are: 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. October 2003 Update The Australian Accounting Standards Board (AASB) has recently announced a change to the process for issuing IFRS converged Australian Standards. Due to the inter-relationships that exist within IFRS and the legal environment in Australia, all Standards must be issued concurrently to ensure that they are not invalidated. Therefore a full set of final IFRS converged AASB Standards will be issued at the same time, that is after the IASB has finalised all IFRS applicable from 1 January 2005, in April/May 2004. Until then, the AASB will progressively approve the contents of proposed new/revised converged AASB Standards which will be included on the AASB website as 'Proposed Standards'. Until such Standards are formally enacted, early adoption will not be possible - the AASB are still deciding whether piecemeal early adoption of some, but not all, the IFRS converged AASB Standards will be permitted. 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. July 2003 Update The following exposure drafts have been recently issued by the Australian Accounting Standard Board (AASB) in line with their strategy for the adoption of IFRS as equivalent AASB Standards. The AASB intends to issue 35 new or revised AASB Standards by 31 March 2004, effective 1 January 2005. These new or revised AASB are expected to be equivalent to IFRS with some possible minor amendments: 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 January 2003 Update In November 2002, the Australian Accounting Standards Board (AASB) issued AASB 1020B, Amendments to Accounting Standard AASB 1020 and Australian Accounting Standard AAS 3. This amendment defers the operative date of AASB 1020/AAS 3, Income Taxes, to periods beginning on or after 1 January 2005. 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. These Exposure Drafts are based on exposure drafts issued by the International Accounting Standards Board (IASB). In line with Australia adopting International Accounting Standards in 2005, the AASB expects to mandate the application of the proposed Standards for reporting periods beginning on or after 1 January 2005. However, ED 108 is likely to be partially applicable in relation to share-based payment transactions with employees (including directors) from 1 January 2004. 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. October 2002 Update In July 2002, the Financial Reporting Council formalised its support for adoption by Australia of International Accounting Standards by 1 January 2005. It is envisaged that the Corporations Act 2001 will be amended to require that the accounting standards applicable to reporting entities under the Act will be the standards issued by the International Accounting Standards Board (IASB). 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 Exposure Draft and Invitation to Comment are based on exposure drafts issued by the International Accounting Standards Board (IASB). This approach is in-line with Australia's adopting International Accounting Standards in 2005. 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. July 2002 Update In July 2002, the Australian Financial Reporting Council (FRC) Proposed (PDF 14k) that Australia replace its national GAAP with International Accounting Standards by 1 January 2005. Certain enabling amendments to the Corporations Act would be required. If enacted, the accounting standards applicable to reporting entities under the Act from 1 January 2005 onward would be IASB standards, and audit reports would refer to companies' compliance with IASB standards. 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. April 2002 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with International Accounting Standards (IAS). In February 2002, the AASB released a publication, The Australian Convergence Handbook, which contains an analysis of the current differences between Australian Standards and International Standards issued by the former International Accounting Standards Committee. 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. January 2002 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with International Accounting Standards (IAS). 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. October 2001 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with IAS. 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. 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. Since the last IAS Plus newsletter, the UIG issued: 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. 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 as follows: 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) At its meeting in August 2001, the AASB considered ED 99, Impairment of Assets, and agreed that the approach in IAS 36 is preferable. Therefore, a further ED based on the requirements of IAS 36 will be developed. 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. July 2001 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with IAS. The AASB have recently reissued the following accounting standards since the last IAS Plus newsletter as part of the harmonisation program: 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. 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 as follows. 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) Other projects on which the AASB is expected to issue exposure drafts in the next 12 months are: 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 April 2001 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with IAS. For 30 June 2001 year-ends, the following Standards come into effect (their equivalent IAS is indicated for reference): 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. January 2001 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with IAS. 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. October 2000 Update The Australian Accounting Standards Board (AASB) is continuing its policy of harmonising Australian Accounting Standards with IAS. 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 AASB 1038 was developed in conjunction with the New Zealand Financial Reporting Standards Board and does not currently have an IAS equivalent. Standards issued by the AASB as part of the harmonisation program do not necessarily conform to the IAS in every respect. 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 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 as follows. 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.