Highlights from the AASB December 2012 meeting

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17 Dec 2012

The Australian Accounting Standards Board (AASB) has released the Action Alert from its meeting held on 12-13 December 2012. Highlights include further discussion on the AASB's approach to the IASB's investment entities amendments, an agreement to withdraw an Australia-specific Interpretation on substantive enactment of tax bills, and consideration of research on differential reporting. The AASB also considered various IASB projects and public sector and not-for-profit matters.

Investment entities

Following on from its discussions at its previous meeting, the AASB continued its deliberations on whether, and if so, how to implement the IASB's investment entities amendments in the Australian context.

The AASB decided to adopt the amendments but require additional disclosures in the financial statements to "compensate for the loss of information that would arise".  The draft Exposure Draft considered by the board would effectively require a full set of consolidated financial statements for investment entities that would otherwise avoid consolidation under the IASB's amendments.

The Action Alert also notes that the views of various board members are split, with three broad camps of members supporting various views.  Accordingly, in addition to the proposals to be put forward in the AASB ED (i.e. include the investment entities amendments but require extensive additional disclosure), two alternative views will be included in the exposure draft:

  • Alternative View 1 - put forward by board members who do not support non-consolidation and do not see the proposed disclosures as a remedy.  Not adopting the amendments would result in affected investment entities reporting under Australian Accounting Standards being unable to assert compliance with IFRSs
  • Alternative View 2 - supported by board members who would prefer the investment entity amendments to be issued without amendment or additional disclosures, but who accept the disclosures as a compromise to maintain Australia's IFRS compliance.

The broader issue of the adoption of IFRS 10 Consolidated Financial Statements in the Australian context has also given rise to other issues.  These include whether the Australian-specific standard, AASB 1038 Life Insurance Contracts, is compliant with IFRS 10, and how to adopt the suite of standards including IFRS 10 in the not-for-profit and public sectors.  These issues, and related exposure drafts and draft amending standards, were also considered at this meeting.

Other matters of interest

Other discussions at the meeting include:

  • Agreement to withdraw Australian Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia, which provides guidance on when tax legislation is considered substantively enacted under AASB 112 Income Taxes (equivalent to IAS 12 Income Taxes). The withdrawal is consistent with the AASB's policy of adopting IFRS without amendment in respect of for-profit entities
  • The receipt of a report on differential reporting in the Australian context, including those entities considering themselves to be "non-reporting entities" (and so exempt at least from applying the presentation and disclosure requirements of many Australian standards, or in their entirety).  The AASB is considering whether to remove the 'reporting entity' concept as it applies to differential reporting in Australia and the report will be a crucial document in the AASB's deliberations on this matter
  • Finalisation of draft standards on budgetary reporting by not-for-profit public sector entities, which are to be exposed on the AASB's website for 45 days for fatal flaw review
  • Finalisation of an amending standard to provide extended transitional relief in relation to defence weapons platforms.

Full details of all matters discussed at the meeting can be found in the AASB Action Alert (link to AASB website).

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