Accounting Standard AASB 2019-1 Amendments to Australian Accounting Standards â€“ References to the Conceptual Framework (Cth)

AASB Standard

AASB 2019-1

May 2019

Amendments to Australian Accounting Standards – References to the Conceptual Framework

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Contents

PREFACE

ACCOUNTING STANDARD

AASB 2019-1 AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS – REFERENCES TO THE CONCEPTUAL FRAMEWORK

from page

OBJECTIVE 6

APPLICATION 7

AMENDMENTS TO THE FRAMEWORK FOR THE PREPARATION AND PRESENTATION
OF FINANCIAL STATEMENTS 8

AMENDMENTS TO STATEMENT OF ACCOUNTING CONCEPTS SAC 1 8

AMENDMENTS TO AASB 2 8

AMENDMENTS TO AASB 3 9

AMENDMENTS TO AASB 6 10

AMENDMENTS TO AASB 7 10

AMENDMENTS TO AASB 8 11

AMENDMENTS TO AASB 9 11

AMENDMENTS TO AASB 10 11

AMENDMENTS TO AASB 12 12

AMENDMENTS TO AASB 14 12

AMENDMENTS TO AASB 17 13

AMENDMENTS TO AASB 101 14

AMENDMENTS TO AASB 108 18

AMENDMENTS TO AASB 110 19

AMENDMENTS TO AASB 112 19

AMENDMENTS TO AASB 116 19

AMENDMENTS TO AASB 119 20

AMENDMENTS TO AASB 121 20

AMENDMENTS TO AASB 124 20

AMENDMENTS TO AASB 128 21

AMENDMENTS TO AASB 132 21

AMENDMENTS TO AASB 133 21

AMENDMENTS TO AASB 134 22

AMENDMENTS TO AASB 137 23

AMENDMENTS TO AASB 138 23

AMENDMENTS TO AASB 139 24

AMENDMENTS TO AASB 140 24

AMENDMENTS TO AASB 1023 24

AMENDMENTS TO AASB 1038 25

AMENDMENTS TO AASB 1048 25

AMENDMENTS TO AASB 1053 27

AMENDMENTS TO AASB 1054 28

AMENDMENTS TO AASB 1055 28

AMENDMENTS TO AASB 1056 29

AMENDMENTS TO AASB 1057 30

AMENDMENTS TO INTERPRETATION 12 33

AMENDMENTS TO INTERPRETATION 16 33

AMENDMENTS TO INTERPRETATION 19 33

AMENDMENTS TO INTERPRETATION 20 33

AMENDMENTS TO INTERPRETATION 22 34

AMENDMENTS TO INTERPRETATION 132 34

AMENDMENTS TO INTERPRETATION 1003 35

AMENDMENTS TO INTERPRETATION 1019 35

AMENDMENTS TO INTERPRETATION 1031 36

AMENDMENTS TO INTERPRETATION 1038 37

AMENDMENTS TO INTERPRETATION 1047 37

AMENDMENTS TO INTERPRETATION 1052 38

AMENDMENTS TO AASB PRACTICE STATEMENT 2 38

COMMENCEMENT OF THE LEGISLATIVE INSTRUMENT 51

APPENDIX

Early application 52

BASIS FOR CONCLUSIONS

Australian Accounting Standard AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework is set out on pages 6 – 53. All the paragraphs have equal authority.

Preface

Standards amended by AASB 2019-1

This Standard makes amendments to the Australian Accounting Standards, Interpretations and other pronouncements listed on pages 6 to 7 of the Standard.

These amendments arise from the issuance of the Conceptual Framework for Financial Reporting and the International Financial Reporting Standard Amendments to References to the Conceptual Framework in IFRS Standards by the International Accounting Standards Board (IASB) in March 2018.

Main features of this Standard

Main requirements

This Standard sets out amendments to Australian Accounting Standards, Interpretations and other pronouncements to reflect the issuance of the Conceptual Framework for Financial Reporting (Conceptual Framework) by the AASB.

The application of the Conceptual Framework is at present limited to:

(a)for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards; and

(b)other for-profit entities that voluntarily elect to apply the Conceptual Framework, which would permit compliance with Australian Accounting Standards (Tier 1) and International Financial Reporting Standards (IFRS Standards).

This Standard makes amendments to Australian Accounting Standards, Interpretations and other pronouncements to permit other entities to continue using the Framework for the Preparation and Presentation of Financial Statements adopted by the AASB in 2004 (Framework) and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity to determine whether they are a reporting entity that needs to prepare general purpose financial statements that comply with Australian Accounting Standards.

Some Australian Accounting Standards, Interpretations and other pronouncements contain references to, or quotations from, the Framework. This Standard updates some of those references and quotations so that they refer to the Conceptual Framework, and makes other amendments to clarify which version of the conceptual framework is referred to in particular pronouncements.

If an entity is required to apply the Conceptual Framework, it cannot identify as a non-reporting entity under SAC 1. The entity will therefore need to prepare general purpose financial statements that comply with Australian Accounting Standards.

Application date

This Standard applies to annual periods beginning on or after 1 January 2020. Earlier application is permitted.

Accounting Standard AASB 2019-1

The Australian Accounting Standards Board makes Accounting Standard AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework under section 334 of the Corporations Act 2001.

Kris Peach
Dated 21 May 2019	Chair – AASB

Accounting Standard AASB 2019-1

Amendments to Australian Accounting Standards – References to the Conceptual Framework

Objective

This Standard amends:

(a)the Framework for the Preparation and Presentation of Financial Statements (July 2004);

(b)Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity (August 1990);

(c)AASB 2 Share-based Payment (July 2015);

(d)AASB 3 Business Combinations (August 2015);

(e)AASB 6 Exploration for and Evaluation of Mineral Resources (August 2015);

(f)AASB 7 Financial Instruments: Disclosures (August 2015);

(g)AASB 8 Operating Segments (August 2015);

(h)AASB 9 Financial Instruments (December 2014);

AASB 10 Consolidated Financial Statements (July 2015);

(j)AASB 12 Disclosure of Interests in Other Entities (August 2015);

(k)AASB 14 Regulatory Deferral Accounts (June 2014);

(l)AASB 17 Insurance Contracts (July 2017);

(m)AASB 101 Presentation of Financial Statements (July 2015);

(n)AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (August 2015);

(o)AASB 110 Events after the Reporting Period (August 2015);

(p)AASB 112 Income Taxes (August 2015);

(q)AASB 116 Property, Plant and Equipment (August 2015);

(r)AASB 119 Employee Benefits (August 2015);

(s)AASB 121 The Effects of Changes in Foreign Exchange Rates (August 2015);

(t)AASB 124 Related Party Disclosures (July 2015);

(u)AASB 128 Investments in Associates and Joint Ventures (August 2015);

AASB 132 Financial Instruments: Presentation (August 2015);

(w)AASB 133 Earnings per Share (August 2015);

AASB 134 Interim Financial Reporting (August 2015);

(y)AASB 137 Provisions, Contingent Liabilities and Contingent Assets (August 2015);

(z)AASB 138 Intangible Assets (August 2015);

(aa)AASB 139 Financial Instruments: Recognition and Measurement (August 2015);

(bb)AASB 140 Investment Property (August 2015);

(cc)AASB 1023 General Insurance Contracts (July 2004);

(dd)AASB 1038 Life Insurance Contracts (July 2004);

(ee)AASB 1048 Interpretation of Standards (December 2017);

(ff)AASB 1053 Application of Tiers of Australian Accounting Standards (June 2010);

(gg)AASB 1054 Australian Additional Disclosures (May 2011);

(hh)AASB 1055 Budgetary Reporting (March 2013);

AASB 1056 Superannuation Entities (June 2014);

(jj)AASB 1057 Application of Australian Accounting Standards (July 2015);

(kk)Interpretation 12 Service Concession Arrangements (August 2015);

Interpretation 16 Hedges of a Net Investment in a Foreign Operation (August 2015);

(mm)Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments (August 2015);

(nn)Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine (August 2015);

(oo)Interpretation 22 Foreign Currency Transactions and Advance Consideration (February 2017);

(pp)Interpretation 132 Intangible Assets—Web Site Costs (August 2015);

(qq)Interpretation 1003 Australian Petroleum Resource Rent Tax (November 2007);

(rr)Interpretation 1019 The Superannuation Contributions Surcharge (September 2004);

(ss)Interpretation 1031 Accounting for the Goods and Services Tax (GST) (July 2004);

(tt)Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities (December 2007);

(uu)Interpretation 1047 Professional Indemnity Claims Liabilities in Medical Defence Organisations (December 2014);

Interpretation 1052 Tax Consolidation Accounting (June 2015); and

(ww)AASB Practice Statement 2 Making Materiality Judgements (December 2017);

as a consequence of the issuance of the Conceptual Framework for Financial Reporting and the International Financial Reporting Standard Amendments to References to the Conceptual Framework in IFRS Standards by the International Accounting Standards Board (IASB) in March 2018.

Application

The amendments set out in this Standard apply to entities and financial statements in accordance with the application of the other Standards and Interpretations set out in AASB 1057 Application of Australian Accounting Standards (as amended).

This Standard applies to annual periods beginning on or after 1 January 2020.

This Standard may be applied to annual periods beginning before 1 January 2020. When an entity applies this Standard to such an annual period, it shall disclose that fact.

This Standard uses underlining, striking out and other typographical material to identify some of the amendments to a pronouncement, in order to make the amendments more understandable. However, the amendments made by this Standard do not include that underlining, striking out or other typographical material. Amended paragraphs are shown with deleted text struck through and new text underlined. Ellipses (…) are used to help provide the context within which amendments are made and also to indicate text that is not amended.

Amendments to the Framework for the Preparation and Presentation of Financial Statements

Paragraphs Aus1.2A and Aus1.2B are added.

Application

…

Aus1.2A This Framework does not apply in relation to reporting periods beginning on or after 1 January 2020 to:

(a) for-profit private sector entities that have public accountability* and are required by legislation to comply with Australian Accounting Standards; and

(b) other for-profit entities that elect to apply the Conceptual Framework for Financial Reporting and the consequential amendments to other pronouncements set out in AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework;

except as otherwise required by Australian Accounting Standards.

*The term ‘public accountability’ is defined in AASB 1053 Application of Tiers of Australian Accounting Standards.

Aus1.2B If an entity identified in paragraph Aus1.2A elects to apply the Conceptual Framework for Financial Reporting to an annual reporting period beginning before 1 January 2020, the entity shall not apply this Framework to that period, except as otherwise required by Australian Accounting Standards.

Amendments to Statement of Accounting Concepts SAC 1

Paragraphs 2A and 2B are added.

Application and Operative Date

…

2A This Statement does not apply in relation to reporting periods beginning on or after 1 January 2020 to:

(a) for-profit private sector entities that have public accountability* and are required by legislation to comply with Australian Accounting Standards; and

(b) other for-profit entities that elect to apply the Conceptual Framework for Financial Reporting and the consequential amendments to other pronouncements set out in AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework.

* The term ‘public accountability’ is defined in AASB 1053 Application of Tiers of Australian Accounting Standards.

2B If an entity identified in paragraph 2A elects to apply the Conceptual Framework for Financial Reporting to an annual reporting period beginning before 1 January 2020, the entity shall not apply this Statement to that period.

Amendments to AASB 2

Paragraphs AusCF1 and 63E are added.

Objective

…

AusCF1 AusCF paragraphs and footnotes included in this Standard apply only to:

(a)not-for-profit entities; and

(b)for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

Effective date

...

63EAASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, issued in 2019, added paragraph AusCF1 and amended the footnote to the definition of an equity instrument in Appendix A. An entity shall apply the amendments for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by AASB 2019-1. An entity shall apply the amendments to AASB 2 retrospectively, subject to (in the case of the amendment to Appendix A) the transitional provisions in paragraphs 53–59 of this Standard, in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendments to AASB 2 by reference to paragraphs 23–28, 50–53 and 54F of AASB 108.

In Appendix A, the footnote to the definition of an equity instrument is amended and an AusCF footnote is added.

5 The ~~Framework for the Preparation and Presentation of Financial Statements~~ Conceptual Framework for Financial Reporting issued in 2019 defines a liability as a present obligation of the entity ~~arising from~~ to transfer an economic resource as a result of past events~~, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits (ie an outflow of cash or other assets of the entity)~~.

AusCF5Notwithstanding footnote 5, in respect of AusCF entities, the Framework for the Preparation and Presentation of Financial Statements defines a liability as a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits (ie an outflow of cash or other assets of the entity).

Amendments to AASB 3

Paragraph AusCF1 is added. In paragraph 11, the footnote to the Framework for the Preparation and Presentation of Financial Statements is amended and footnote AusCF1 is added.

Objective

…

AusCF1AusCF paragraphs and footnotes included in this Standard apply only to:

(a)not-for-profit entities; and

(b)for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

…

Recognition conditions

11 To qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities in the Framework for the Preparation and Presentation of Financial Statements^{1, AusCF1} at the acquisition date. For example, costs the acquirer expects but is not obliged to incur in the future to effect its plan to exit an activity of an acquiree or to terminate the employment of or relocate an acquiree’s employees are not liabilities at the acquisition date. Therefore, the acquirer does not recognise those costs as part of applying the acquisition method. Instead, the acquirer recognises those costs in its post-combination financial statements in accordance with other Australian Accounting Standards.

1 ~~In December 2013 the AASB amended the Framework for the Preparation and Presentation of Financial Statements.~~ For this Standard, acquirers are required to apply the definitions of an asset and a liability and supporting guidance in the Framework for the Preparation and Presentation of Financial Statements adopted by the AASB in 2004 rather than the Conceptual Framework for Financial Reporting issued in 2019.

AusCF1Notwithstanding footnote 1, in respect of AusCF entities, in December 2013 the AASB amended the Framework for the Preparation and Presentation of Financial Statements.

Amendments to AASB 6

Paragraph 10 is amended and paragraphs AusCF1, AusCF10 and 26A are added.

Objective

…

AusCF1AusCF paragraphs included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.

…

Elements of cost of exploration and evaluation assets

…

10 Expenditures related to the development of mineral resources shall not be recognised as exploration and evaluation assets. The ~~Framework for the Preparation and Presentation of Financial Statements~~ Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards) and AASB 138 Intangible Assets provide guidance on the recognition of assets arising from development.

AusCF10Notwithstanding paragraph 10, in respect of AusCF entities, expenditures related to the development of mineral resources shall not be recognised as exploration and evaluation assets. The Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards) and AASB 138 Intangible Assets provide guidance on the recognition of assets arising from development.

…

Effective date

…

26AAASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, issued in 2019, added AusCF paragraphs and amended paragraph 10. An entity shall apply the amendments for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by AASB 2019-1. An entity shall apply the amendments to AASB 6 retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendments to AASB 6 by reference to paragraphs 23–28, 50–53 and 54F of AASB 108.

Amendments to AASB 7

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 8

Paragraph AusCF1 is added.

Core principle

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 9

Paragraph AusCF1 is added and paragraph Aus1.1 is deleted. (The application of AASB 9 to entities and financial statements is set out in AASB 1057 Application of Australian Accounting Standards.)

Chapter 1 Objective and application

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Aus1.1 [Deleted by the AASB] ~~This Standard applies to:~~

~~(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;~~

~~(b) general purpose financial statements of each other reporting entity; and~~

~~(c) financial statements that are, or are held out to be, general purpose financial statements.~~

Amendments to AASB 10

Paragraphs AusCF1 and AusCFAus4.2 are added. Paragraph Aus4.2 is amended.

Objective

…

AusCF1AusCF paragraphs included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.

…

Scope

…

Aus4.2 Notwithstanding paragraphs 4(a) and Aus4.1, the ultimate Australian parent shall present consolidated financial statements that consolidate its investments in subsidiaries in accordance with this Standard when ~~either the parent or the group is a reporting entity or both the parent and the group are reporting entities~~ the ultimate Australian parent is required by legislation to comply with Australian Accounting Standards, except if the ultimate Australian parent is required, in accordance with paragraph 31 of this Standard, to measure all of its subsidiaries at fair value through profit or loss.

AusCFAus4.2 Notwithstanding paragraphs 4(a), Aus4.1 and Aus4.2, in respect of AusCF entities, the ultimate Australian parent shall present consolidated financial statements that consolidate its investments in subsidiaries in accordance with this Standard when either the parent or the group is a reporting entity or both the parent and the group are reporting entities, except if the ultimate Australian parent is required, in accordance with paragraph 31 of this Standard, to measure all of its subsidiaries at fair value through profit or loss.

Amendments to AASB 12

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 14

Paragraph AusCF1 is added. Paragraph Aus4.1 is deleted. (The application of AASB 14 to entities and financial statements is set out in AASB 1057 Application of Australian Accounting Standards.) The footnote to the first occurrence of ‘reliable’ in paragraph 13 is amended and a new footnote is also added.

Objective

…

AusCF1AusCF paragraphs and footnotes included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

…

Application

Aus4.1 [Deleted by the AASB] ~~This Standard applies to:~~

~~(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;~~

~~(b) general purpose financial statements of each other reporting entity; and~~

~~(c) financial statements that are, or are held out to be, general purpose financial statements.~~

…

13 An entity shall not change its accounting policies in order to start to recognise regulatory deferral account balances. An entity may only change its accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral account balances if the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable^{1, AusCF1}, or more reliable and no less relevant to those needs. An entity shall judge relevance and reliability using the criteria in paragraph 10 of AASB 108.

1 In ~~December~~ 2013, the AASB amended the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards) (the Framework). The term “faithful representation”, which was used in the Framework from 2013 and is also used in the Conceptual Framework for Financial Reporting issued in 2019, encompasses the main characteristics that the ~~previous version of the~~ Framework called “reliability”. The requirement in paragraph 13 of this Standard is based on the requirements of AASB 108, which retains the term “reliable”.

AusCF1Notwithstanding footnote 1, in respect of AusCF entities, in December 2013, the AASB amended the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards). The term “faithful representation” encompasses the main characteristics that the previous version of the Framework called “reliability”. The requirement in paragraph 13 of this Standard is based on the requirements of AASB 108, which retains the term “reliable”.

Amendments to AASB 17

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 101

Paragraphs 15, 19–20, 23–24, 28, 89, Aus7.2 in Appendix A and RDR15.1 in Appendix B are amended. Paragraphs Aus136.1 and Aus136.2 are deleted. Paragraphs AusCF1, AusCF15, AusCF19–AusCF20, AusCF23–AusCF24, AusCF28, AusCF89, AusCFAus136.1, AusCFAus136.2 and 139S and paragraph AusCFRDR15.1 in Appendix B are added. Three footnotes are deleted – the footnote to the second sentence in paragraph 15, to paragraph 28 and to ‘Framework’s’ in paragraph 89.

Objective

…

AusCF1AusCF paragraphs and footnotes included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

…

Fair presentation and compliance with Standards

15 Financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the ~~Framework~~ Conceptual Framework for Financial Reporting (Conceptual Framework).³ The application of Australian Accounting Standards, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.

3Paragraphs 15–24 contain references to the objective of financial statements set out in the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048). In December 2013 the AASB amended the Framework, and thereby replaced the objective of financial statements with the objective of general purpose financial reporting: see Chapter 1 of the Framework.

AusCF15Notwithstanding paragraph 15, in respect of AusCF entities, financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework.^AusCF3 The application of Australian Accounting Standards, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.

AusCF3Paragraphs AusCF15-AusCF24 contain references to the objective of financial statements set out in the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048). In December 2013 the AASB amended the Framework, and thereby replaced the objective of financial statements with the objective of general purpose financial reporting: see Chapter 1 of the Framework.

…

19 In the extremely rare circumstances in which management concludes that compliance with a requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the ~~Framework~~ Conceptual Framework, the entity shall depart from that requirement in the manner set out in paragraph 20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.

AusCF19Notwithstanding paragraph 19, in respect of AusCF entities, in the extremely rare circumstances in which management concludes that compliance with a requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the Framework, the entity shall depart from that requirement in the manner set out in paragraph AusCF20 if the relevant regulatory framework requires, or otherwise does not prohibit, such a departure.

20 When an entity departs from a requirement of an Australian Accounting Standard in accordance with paragraph 19, it shall disclose:

(a) that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows;

(b) that it has complied with applicable Australian Accounting Standards, except that it has departed from a particular requirement to achieve a fair presentation;

(c) the title of the Australian Accounting Standard from which the entity has departed, the nature of the departure, including the treatment that the Australian Accounting Standard would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the ~~Framework~~ Conceptual Framework, and the treatment adopted; and

(d) for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement.

AusCF20Notwithstanding paragraph 20, in respect of AusCF entities, when an entity departs from a requirement of an Australian Accounting Standard in accordance with paragraph AusCF19, it shall disclose:

(a) that management has concluded that the financial statements present fairly the entity’s financial position, financial performance and cash flows;

(b) that it has complied with applicable Australian Accounting Standards, except that it has departed from a particular requirement to achieve a fair presentation;

(c) the title of the Australian Accounting Standard from which the entity has departed, the nature of the departure, including the treatment that the Australian Accounting Standard would require, the reason why that treatment would be so misleading in the circumstances that it would conflict with the objective of financial statements set out in the Framework, and the treatment adopted; and

(d) for each period presented, the financial effect of the departure on each item in the financial statements that would have been reported in complying with the requirement.

…

23 In the extremely rare circumstances in which management concludes that compliance with a requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the ~~Framework~~ Conceptual Framework, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing:

(a) the title of the Australian Accounting Standard in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the ~~Framework~~ Conceptual Framework; and

(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.

AusCF23Notwithstanding paragraph 23, in respect of AusCF entities, in the extremely rare circumstances in which management concludes that compliance with a requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the Framework, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing:

(a) the title of the Australian Accounting Standard in question, the nature of the requirement, and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework; and

(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.

24 For the purpose of paragraphs 19–23, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to represent and, consequently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the ~~Framework~~ Conceptual Framework, management considers:

(a) why the objective of financial statements is not achieved in the particular circumstances; and

(b) how the entity’s circumstances differ from those of other entities that comply with the requirement. If other entities in similar circumstances comply with the requirement, there is a rebuttable presumption that the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the ~~Framework~~ Conceptual Framework.

AusCF24Notwithstanding paragraph 24, in respect of AusCF entities, for the purpose of paragraphs AusCF19–AusCF23, an item of information would conflict with the objective of financial statements when it does not represent faithfully the transactions, other events and conditions that it either purports to represent or could reasonably be expected to represent and, consequently, it would be likely to influence economic decisions made by users of financial statements. When assessing whether complying with a specific requirement in an Australian Accounting Standard would be so misleading that it would conflict with the objective of financial statements set out in the Framework, management considers:

(a) why the objective of financial statements is not achieved in the particular circumstances; and

(b) how the entity’s circumstances differ from those of other entities that comply with the requirement. If other entities in similar circumstances comply with the requirement, there is a rebuttable presumption that the entity’s compliance with the requirement would not be so misleading that it would conflict with the objective of financial statements set out in the Framework.

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Accrual basis of accounting

…

28 When the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the ~~Framework~~ Conceptual Framework.⁴

4~~The Framework for the Preparation and Presentation of Financial Statements was amended by the AASB in December 2013.~~

AusCF28Notwithstanding paragraph 28, in respect of AusCF entities, when the accrual basis of accounting is used, an entity recognises items as assets, liabilities, equity, income and expenses (the elements of financial statements) when they satisfy the definitions and recognition criteria for those elements in the Framework.^AusCF4

AusCF4The Framework for the Preparation and Presentation of Financial Statements was amended by the AASB in December 2013.

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Profit or loss for the period

…

89 Some Australian Accounting Standards specify circumstances when an entity recognises particular items outside profit or loss in the current period. AASB 108 specifies two such circumstances: the correction of errors and the effect of changes in accounting policies. Other Australian Accounting Standards require or permit components of other comprehensive income that meet the ~~Framework’s~~⁵Conceptual Framework’s definition of income or expense to be excluded from profit or loss (see paragraph 7).

5~~The Framework for the Preparation and Presentation of Financial Statements was amended by the AASB in December 2013.~~

AusCF89Notwithstanding paragraph 89, in respect of AusCF entities, some Australian Accounting Standards specify circumstances when an entity recognises particular items outside profit or loss in the current period. AASB 108 specifies two such circumstances: the correction of errors and the effect of changes in accounting policies. Other Australian Accounting Standards require or permit components of other comprehensive income that meet the Framework’s^AusCF5 definition of income or expense to be excluded from profit or loss (see paragraph 7).

AusCF5The Framework for the Preparation and Presentation of Financial Statements was amended by the AASB in December 2013.

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Capital

…

Aus136.1 [Deleted by the AASB] An entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is not a reporting entity need not present the disclosures required by paragraphs 134–136.

AusCFAus136.1 In respect of AusCF entities, an entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is not a reporting entity need not present the disclosures required by paragraphs 134–136.

Aus136.2 [Deleted by the AASB] ~~Notwithstanding paragraph Aus136.1, a not-for-profit-entity need not present the disclosures required by paragraphs 134-136.~~

AusCFAus136.2 Notwithstanding paragraph AusCFAus136.1, in respect of AusCF entities, a not-for-profit entity need not present the disclosures required by paragraphs 134 –136.

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Transition and effective date

…

139SAASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, issued in 2019, added AusCF paragraphs, amended paragraphs 15, 19–20, 23–24, 28, 89, Aus7.2 and RDR15.1, and deleted paragraphs Aus136.1 and Aus136.2. An entity shall apply those amendments for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by AASB 2019-1. An entity shall apply the amendments to AASB 101 retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendments to AASB 101 by reference to paragraphs 23–28, 50–53 and 54F of AASB 108.

…

Appendix A

Australian defined terms

…

Aus7.2 In respect of public sector entities, local governments, governments and most, if not all, government departments are reporting entities:

~~reporting~~ entity means 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.

government means …

Appendix B

Australian reduced disclosure requirements

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RDR15.1 Financial statements shall present fairly the financial position, financial performance and cash flows of an entity applying Australian Accounting Standards – Reduced Disclosure Requirements. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Conceptual Framework. The application of Australian Accounting Standards – Reduced Disclosure Requirements, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.

AusCFRDR15.1 Notwithstanding paragraph RDR15.1, in respect of AusCF entities, financial statements shall present fairly the financial position, financial performance and cash flows of an entity applying Australian Accounting Standards – Reduced Disclosure Requirements. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework. The application of Australian Accounting Standards – Reduced Disclosure Requirements, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation.

Amendments to AASB 108

Paragraphs AusCF1, AusCF11 and 54F–54G are added. Paragraph 11(b) is amended. The footnote to paragraph 11(b) is amended. The heading immediately before paragraph 54 is amended.

Objective

…

AusCF1AusCF paragraphs and footnotes included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

…

Selection and application of accounting policies

…

11 In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:

(a) the requirements in Australian Accounting Standards dealing with similar and related issues; and

(b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the ~~Framework~~ Conceptual Framework for Financial Reporting (Conceptual Framework) (as identified in AASB 1048 Interpretation of Standards).³

3 In December 2013 the AASB amended the Framework for the Preparation and Presentation of Financial Statements Paragraph 54G explains how this requirement is amended for regulatory account balances.

AusCF11Notwithstanding paragraph 11, in respect of AusCF entities, in making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:

(a) the requirements in Australian Accounting Standards dealing with similar and related issues; and

(b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework^AusCF3.

AusCF3 In December 2013 the AASB amended the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards).

Effective date and transition

...

54FAASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, issued in 2019, added AusCF paragraphs and amended paragraph 11(b). An entity shall apply those amendments for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by AASB 2019-1. An entity shall apply paragraph 11 retrospectively in accordance with this Standard. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply paragraph 11 by reference to paragraphs 23–28 of this Standard. If retrospective application of any amendment in AASB 2019-1 would involve undue cost or effort, an entity shall, in applying paragraphs 23–28 of this Standard, read any reference except in the last sentence of paragraph 27 to ‘is impracticable’ as ‘involves undue cost or effort’ and any reference to ‘practicable’ as ‘possible without undue cost or effort’.

54GIf an entity does not apply AASB 14 Regulatory Deferral Accounts, the entity shall, in applying paragraph 11(b) to regulatory account balances, continue to refer to, and consider the applicability of, the definitions, recognition criteria, and measurement concepts in the Framework for the Preparation and Presentation of Financial Statements⁴ instead of those in the Conceptual Framework. A regulatory account balance is the balance of any expense (or income) account that is not recognised as an asset or a liability in accordance with other applicable Australian Accounting Standards but is included, or is expected to be included, by the rate regulator in establishing the rate(s) that can be charged to customers. A rate regulator is an authorised body that is empowered by statute or regulation to establish the rate or a range of rates that bind an entity. The rate regulator may be a third-party body or a related party of the entity, including the entity’s own governing board, if that body is required by statute or regulation to set rates both in the interest of the customers and to ensure the overall financial viability of the entity.

4The reference is to the Framework for the Preparation and Presentation of Financial Statements adopted by the AASB in 2004.

Amendments to AASB 110

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 112

Paragraph AusCF1 is added.

Scope

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 116

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 119

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 121

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 124

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 128

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 132

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 133

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 134

Paragraphs AusCF1, AusCF31, AusCF33 and 58 are added. Paragraphs 31 and 33 are amended. A footnote is added to paragraph B23 in the illustrative examples accompanying AASB 134.

Scope

…

AusCF1AusCF paragraphs and footnotes included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.

…

Same accounting policies as annual

…

31 Under the ~~Framework for the Preparation and Presentation of Financial Statements~~ ~~(the Framework)~~ Conceptual Framework for Financial Reporting (Conceptual Framework) (as identified in AASB 1048 Interpretation of Standards),³ recognition is the ‘process of ~~incorporating in the balance sheet or income statement~~ capturing, for inclusion in the statement of financial position or the statement(s) of financial performance, an item that meets the definition of ~~an element~~ one of the elements of the financial statements ~~and satisfies the criteria for recognition’~~. The definitions of assets, liabilities, income, and expenses are fundamental to recognition, at the end of both annual and interim financial reporting periods.

3~~In December 2013 the AASB amended the Framework for the Preparation and Presentation of Financial Statements.~~

AusCF31Notwithstanding paragraph 31, in respect of AusCF entities, under the Framework for the Preparation and Presentation of Financial Statements (the Framework) (as identified in AASB 1048 Interpretation of Standards)^AusCF3, recognition is the ‘process of incorporating in the balance sheet or income statement an item that meets the definition of an element and satisfies the criteria for recognition’. The definitions of assets, liabilities, income, and expenses are fundamental to recognition, at the end of both annual and interim financial reporting periods.

AusCF3In December 2013 the AASB amended the Framework for the Preparation and Presentation of Financial Statements.

…

33 An essential characteristic of income (revenue) and expenses is that the related inflows and outflows of assets and liabilities have already taken place. If those inflows or outflows have taken place, the related revenue and expense are recognised; otherwise they are not recognised. The Framework says that ‘expenses are recognised in the income statement when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably… [The] Framework Conceptual Framework does not allow the recognition of items in the ~~balance sheet~~ statement of financial position which do not meet the definition of assets or liabilities.’

AusCF33Notwithstanding paragraph 33, in respect of AusCF entities, an essential characteristic of income (revenue) and expenses is that the related inflows and outflows of assets and liabilities have already taken place. If those inflows or outflows have taken place, the related revenue and expense are recognised; otherwise they are not recognised. The Framework says that ‘expenses are recognised in the income statement when a decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably… [The] Framework does not allow the recognition of items in the balance sheet which do not meet the definition of assets or liabilities.’

…

Effective date

…

AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework, issued in 2019, added AusCF paragraphs and amended paragraphs 31, 33 and B23. An entity shall apply those amendments for annual periods beginning on or after 1 January 2020. Earlier application is permitted if at the same time an entity also applies all other amendments made by AASB 2019-1. An entity shall apply the amendments to AASB 134 retrospectively in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. However, if an entity determines that retrospective application would be impracticable or would involve undue cost or effort, it shall apply the amendments to AASB 134 by reference to paragraphs 43–45 of this Standard and paragraphs 23–28, 50–53 and 54F of AASB 108.

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Contractual or anticipated purchase price changes

B23 Volume rebates or discounts and other contractual changes in the prices of raw materials, labour, or other purchased goods and services are anticipated in interim periods, by both the payer and the recipient, if it is probable that they have been earned or will take effect. Thus, contractual rebates and discounts are anticipated but discretionary rebates and discounts are not anticipated because the resulting asset or liability would not satisfy the conditions in the Framework⁴ that an asset must be a resource controlled by the entity as a result of a past event and that a liability must be a present obligation whose settlement is expected to result in an outflow of resources.

4The reference to the Framework is to the Framework for the Preparation and Presentation of Financial Statements adopted by the AASB in 2004.

Amendments to AASB 137

Paragraph AusCF1 is added and a footnote is added to the definition of a liability in paragraph 10.

Scope

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

…

Definitions

…

A liability is a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.*

*The definition of a liability in this Standard was not revised following the revision of the definition of a liability in the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards) issued in 2019.

Amendments to AASB 138

A footnote is added to the definition of an asset in paragraph 8.

Definitions

…

An asset is a resource:

(a) controlled by an entity as a result of past events; and

(b) from which future economic benefits are expected to flow to the entity.*

*The definition of an asset in this Standard was not revised following the revision of the definition of an asset in the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards) issued in 2019.

Amendments to AASB 139

Paragraph AusCF1 is added.

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 140

Paragraph AusCF1 is added.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Amendments to AASB 1023

Paragraphs AusCF1 and AusCF17.6.4 are added. Paragraph 17.6.4 is amended.

1 Application

…

AusCF1AusCF paragraphs included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.

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Insurance Contracts – Explanation of Recognised Amounts

…

17.6.4 When an insurer is presenting the disclosures required by paragraphs 17.6.1(c) and 17.6.1(d) the insurer determines the level and extent of disclosure that is appropriate having regard to its circumstances and the qualitative characteristics of financial statements under the Conceptual Framework for Financial Reporting ~~Framework for the Preparation and Presentation of Financial Statements~~ (as identified in AASB 1048 Interpretation of Standards).

AusCF17.6.4 Notwithstanding paragraph 17.6.4, in respect of AusCF entities, when an insurer is presenting the disclosures required by paragraphs 17.6.1(c) and 17.6.1(d) the insurer determines the level and extent of disclosure that is appropriate having regard to its circumstances and the qualitative characteristics of financial statements under the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards).

Amendments to AASB 1038

Paragraphs AusCF1 and AusCF14.1.7 are added. Paragraph 14.1.7 is amended.

1 Application

…

AusCF1AusCF paragraphs included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.

…

14 Life Insurance Contracts Disclosure – Explanation of Recognised Amounts

…

14.1.7 When a life insurer is presenting the disclosures required by paragraphs 14.1.1(c) and 14.1.1(d) the insurer determines the level and extent of disclosure that is appropriate having regard to its circumstances and the qualitative characteristics of financial statements under the Conceptual Framework for Financial Reporting ~~Framework for the Preparation and Presentation of Financial Statements~~ (as identified in AASB 1048 Interpretation of Standards).

AusCF14.1.7 Notwithstanding paragraph 14.1.7, in respect of AusCF entities, when a life insurer is presenting the disclosures required by paragraphs 14.1.1(c) and 14.1.1(d) the insurer determines the level and extent of disclosure that is appropriate having regard to its circumstances and the qualitative characteristics of financial statements under the Framework for the Preparation and Presentation of Financial Statements (as identified in AASB 1048 Interpretation of Standards).

Amendments to AASB 1048

Paragraphs AusCF1, AusCF10 and AusCF11 are added. Paragraphs 1, 10 and 11 are amended.

Objective

1 The objective of this Standard is to provide an up-to-date listing of Australian Interpretations and to ensure the effectiveness of references in Australian Accounting Standards to Australian Interpretations and to the Framework for the Preparation and Presentation of Financial Statements (Framework) and the Conceptual Framework for Financial Reporting (Conceptual Framework). AASB and UIG Interpretations are referred to collectively in this Standard as Australian Interpretations.

AusCF1AusCF paragraphs included in this Standard apply only to:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in this Standard).

Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs.

…

Conceptual framework

10 Each reference to the ~~Framework for the Preparation and Presentation of Financial Statements~~ Conceptual Framework for Financial Reporting (or Conceptual Framework) in other Australian Accounting Standards (including Interpretations) is taken to be a reference to the relevant pronouncement listed in Table 3 below. Each row in Table 3 is to be treated as a separate provision of this Standard.

Table 3: Australian conceptual framework pronouncements

Issue Date	Title	Application Date (annual reporting periods)
[Month 2019]	Conceptual Framework for Financial Reporting (or Conceptual Framework) Note – this pronouncement is applicable only to for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards and other for-profit entities that elect to apply this Framework	(beginning) 1 January 2020
~~June 2014~~ ~~[as amended to]~~	~~Framework for the Preparation and Presentation of Financial Statements (or Framework)~~	~~(beginning)~~ ~~1 July 2014~~

AusCF10Notwithstanding paragraph 10, in respect of AusCF entities, each reference to the Framework for the Preparation and Presentation of Financial Statements (or Framework) in other Australian Accounting Standards (including Interpretations) is taken to be a reference to the relevant pronouncement listed in Table 3 below. Each row in Table 3 is to be treated as a separate provision of this Standard.

Table 3: Australian conceptual framework pronouncements

Issue Date	Title	Application Date (annual reporting periods)
June 2014 [as amended to]	Framework for the Preparation and Presentation of Financial Statements (or Framework)	(beginning) 1 July 2014

11 This Standard updates references to the Conceptual Framework in Australian Accounting Standards (including Interpretations) to the relevant amended version of the Conceptual Framework. The principal application date listed in each row of Table 3 is a reference to annual reporting periods beginning or ending (as indicated) on or after the date specified. An entity may elect to apply an amended version of the pronouncement to annual reporting periods in advance of that stated in Table 3, subject to any early application paragraphs.

AusCF11Notwithstanding paragraph 11, in respect of AusCF entities, this Standard updates references to the Framework in Australian Accounting Standards (including Interpretations) to the relevant amended version of the Framework. The principal application date listed in each row of Table 3 is a reference to annual reporting periods beginning or ending (as indicated) on or after the date specified. An entity may elect to apply an amended version of the pronouncement to annual reporting periods in advance of that stated in Table 3, subject to any early application paragraphs.

Amendments to AASB 1053

Paragraph AusCF1 is added. Paragraphs 2, 9 and 11 and Appendix A are amended. Paragraphs B3 and B4 are added in Appendix B.

Objective

…

AusCF1AusCF entities are:

(a) not-for-profit entities; and

(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

Application

2 This Standard applies to¹:

(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act;

(b) general purpose financial statements of each reporting entity;

(c) financial statements that are, or are held out to be, general purpose financial statements; ~~and~~

(d) financial statements of General Government Sectors (GGSs) prepared in accordance with AASB 1049 Whole of Government and General Government Sector Financial Reporting; and

(e) for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards.

…

Tiers of Reporting Requirements

…

9 Tier 2 comprises the recognition and measurement requirements of Tier 1 (including consolidation and the equity method of accounting) but substantially reduced disclosure requirements. Except for the presentation of a third statement of financial position under Tier 1², the presentation requirements under Tier 1 and Tier 2 are the same.

…

11 ~~Tier 1 reporting requirements shall apply to the general purpose financial statements of the following types of entities~~ The following types of entities shall prepare general purpose financial statements that comply with Tier 1 reporting requirements:

(a) for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards; and

(b) the Australian Government and State, Territory and Local Governments.

…

APPENDIX A

DEFINED TERMS

…

Public accountability means accountability to those existing and potential resource providers and others external to the entity who make economic decisions but are not in a position to demand reports tailored to meet their particular information needs.

~~A for-profit private sector~~ – an entity has public accountability if:

(a) its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or

(b) it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. ~~This is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.~~

~~Reporting entity~~ means an entity in respect of which it is reasonable to expect the existence of users who rely on the entity’s general purpose financial statements 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.

APPENDIX B

PUBLIC ACCOUNTABILITY

…

B3Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organisations, co-operative enterprises requiring a nominal membership deposit and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable.

B4Examples of entities that hold assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses are most likely to include banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.

Amendments to AASB 1054

Paragraph 2 is deleted. (The application of AASB 1054 to entities and financial statements is set out in AASB 1057 Application of Australian Accounting Standards.)

Application

2 [Deleted by the AASB] ~~This Standard applies to:~~

~~(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act;~~

~~(b) general purpose financial statements of each reporting entity; and~~

~~(c) financial statements that are, or are held out to be, general purpose financial statements.~~

Amendments to AASB 1055

Paragraph 2 is deleted. (The application of AASB 1055 to entities and financial statements is set out in AASB 1057 Application of Australian Accounting Standards.)

Application and Scope

2 [Deleted by the AASB] ~~This Standard applies to:~~

~~(a) whole of government general purpose financial statements of each government;~~

~~(b) financial statements of each government’s GGS;~~

~~(c) general purpose financial statements of each not-for-profit reporting entity within the GGS; and~~

Securitisation trusts

BC22Securitisation trusts are listed, unquoted special purpose vehicles structured through a trust, established to facilitate the issue of asset-backed securities. Securitisation trusts are themselves unlisted, however they issue debt instruments which are listed on the ASX and/or another securities exchange. They have no legislative requirement to prepare financial statements. Their financial reporting obligations are governed by their trust deed and ASX listing rules, and they may be preparing special purpose financial statements if they have determined in accordance with SAC 1 Definition of the Reporting Entity that there are no external users dependent on their general purpose financial statements.

BC23Securitisation trusts undertake over-the-counter (i.e. unquoted) transactions, and while the trustee (a third party) is responsible for maintaining the register of investors, investment is often made via custodian entities, making the ultimate holder of asset-backed securities difficult to identify.

BC24Respondents to ITC 39 sought clarification regarding whether securitisation trusts were considered to have public accountability. For the Board to determine whether or not securitisation trusts are publicly accountable would require an interpretation of facts and circumstances. Further, the matter would need to be assessed against the principles of the Interpretations and Improvements Model. The Interpretations and Improvements Model states that issues relating to the interpretation of IFRS Standards would be referred to the International Financial Reporting Interpretations Committee (IFRIC) for its consideration. However, prior to this, the Board needed to assess the issue against specific criteria, the first of which is whether the issue is widespread and has practical relevance. As there were only 126 securitisation trusts listed on the ASX (in August 2018), the issue was not considered widespread and therefore would not meet the requirements of the Interpretations and Improvements Model. The Board also noted that its decision to limit the scope of Phase 1 to entities required by legislation to prepare financial statements would mean that these trusts would be considered as part of Phase 2.

Small internally held registered managed investment schemes (MIS)

BC25Some internal registered MIS are currently preparing special purpose financial statements to satisfy the reporting requirements of the Corporations Act 2001 as they have determined in accordance with SAC 1 that there are no external users of their financial statements. These internal registered MIS only accept investments from other entities within their group, however they are required to be registered under the Corporations Act 2001. Appendix B of AASB 1053 deems registered MIS to have public accountability.

BC26When the Board developed its approach to differential reporting, registered MIS were deemed to be publicly accountable in the Australian context as a means of clarifying the IASB definition of public accountability. At the time, registered MIS were seen as being the Australian equivalents of mutual funds in other jurisdictions as they were expected to hold assets in a fiduciary capacity for a broad group of outsiders. However, due to the nature of these internal registered MIS, it is possible that they may not have public accountability as defined, as they may not hold assets in a fiduciary capacity for a broad group of outsiders. The question of whether all registered MIS should continue to be deemed to have public accountability will be revisited as part of the public accountability sub-project.

Unlisted trusts maintained by State Governments

BC27Respondents also identified that some State Governments have established unlisted investment trusts under State legislation to hold investments in various types of assets, such as infrastructure. Some investments are held in partnership or joint venture with external parties, such as superannuation funds. These trusts are for-profit public sector entities. They do not have a legislative requirement to prepare financial statements, with their financial reporting obligations directed by their Trust Deed.

BC28These trusts are currently preparing special purpose financial statements on the basis that they are not reporting entities. However, as they are holding assets in a fiduciary capacity, they may be considered to have public accountability under the definition in the IFRS for SMEs. The Board noted that its decision to limit the scope of Phase 1 to entities required by legislation to prepare financial statements would mean that these trusts would be considered as part of Phase 2.

Legislation versus constituting documents

BC29Respondents to ITC 39 identified some entities that may be affected by the amendments proposed in Phase 1, including trusts that are required by their constitutional document (rather than legislation) to prepare financial statements that comply with Australian Accounting Standards. They do not have any legislative requirement to prepare such financial statements and may be preparing special purpose financial statements. This includes securitisation trusts and certain public sector trusts.

BC30The Board noted that while changing constitutional documents is possible, it can be onerous and if not done correctly can have tax consequences. Many trust deeds may have template wording referring to compliance with Australian Accounting Standards without the trustees or the beneficiaries having considered whether this would need to involve the preparation of general purpose financial statements. Based on feedback obtained from targeted outreach activities, these trusts may provide detailed information to their beneficiaries about their financial performance and position on a regular basis.

BC31The AASB’s For-Profit Entity Standard-Setting Framework requires publicly accountable for-profit entities to prepare Tier 1 general purpose financial statements on the basis that these entities would need to state compliance with IFRS Standards. However, entities that do not have any legislative requirement to prepare financial statements and are required only by their constitution or trust deed to comply with Australian Accounting Standards often will not need to confirm compliance with IFRS Standards.

BC32The AASB’s For-Profit Entity Standard-Setting Framework further notes that publicly accountable entities should prepare Tier 1 general purpose financial statements as these types of entities would have a significant impact on the Australian economy and therefore should be subject to the highest level of accountability. However, where entities are required to comply with Australian Accounting Standards only as a result of their constitution or trust deed, and their members have in the past been comfortable with the amount of information provided in the form of special purpose financial statements, the Board did not consider it appropriate to mandate the preparation of Tier 1 general purpose financial statements for such entities as part of Phase 1.

BC33Consequently, Phase 1 is intended to allow entities to maintain compliance with IFRS Standards, not to extend requirements for entities to prepare general purpose financial statements if they are not currently required by legislation to prepare financial statements. To ensure that Phase 1 did not unintentionally require such entities to prepare general purpose financial statements, the Board decided to limit Phase 1 to for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards. This ensures the reporting requirements of entities with public accountability that do not have a legislative requirement to prepare financial statements will not be affected by Phase 1. The appropriateness of this limitation will however be reconsidered as part of Phase 2 after further research and outreach. The Board also confirmed that those for-profit entities wanting to voluntarily comply with Tier 1 and IFRS Standards should be permitted to do so, including for-profit entities in the public sector.

Maintaining two conceptual frameworks

BC34When deciding how to implement Option 1 for Phase 1, the Board considered the following alternatives:

Option 1	Option 2	Option 3	Option 4
Two conceptual frameworks:	One conceptual framework:	Two conceptual frameworks:	One conceptual framework:
Entities applying the revised Conceptual Framework:	1 Revised Conceptual Framework.	1(a) Revised Conceptual Framework.	1 Revised Conceptual Framework.	1(a) Revised Conceptual Framework.
Other entities:	2 Existing Conceptual Framework and SAC 1[1].	1(b) Revised Conceptual Framework minus Chapter 3[2], which is replaced by SAC 1.	2 Existing Conceptual Framework and SAC 1.	1(b) Revised Conceptual Framework minus Chapter 3, which is replaced by SAC 1.

[1] Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity

[2] Chapter 3 Financial Statements and the Reporting Entity

Option 1	Option 2	Option 3	Option 4
Consequential amendments:	One set of Australian Accounting Standards that continue to be updated for both for-profit and not-for-profit changes.	One set of Australian Accounting Standards that continue to be updated for both for-profit and not-for-profit changes.	Two sets of Australian Accounting Standards. - One set that continues to be updated for for-profit changes. - One set reflecting the requirements in effect immediately prior to the revised Conceptual Framework being issued which are not updated.	Up to two sets of Australian Accounting Standards.
The reporting entity clash	Addressed in Phase 1, by inserting paragraph AusCF1 into each Australian Accounting Standard that contains the term reporting entity. Paragraph AusCF1 would direct other entities to AASB 1057[3] (and SAC 1) for the definition of the term reporting entity.	Addressed in Phase 1, by inserting paragraph AusCF1 into each Australian Accounting Standard that contains the term reporting entity. Paragraph AusCF1 would direct other entities to AASB 1057 (and SAC 1) for the definition of the term reporting entity.	Tolerated in Phase 1. That is, unlike in Option 1, it would not be addressed via an AusCF1 paragraph.	Tolerated in Phase 1. That is, unlike in Option 2, it would not be addressed via an AusCF1 paragraph.

Option 1

Option 2

Option 3

Option 4

Consequential amendments:

One set of Australian Accounting Standards that continue to be updated for both for-profit and not-for-profit changes.

Two sets of Australian Accounting Standards.

- One set that continues to be updated for for-profit changes.

- One set reflecting the requirements in effect immediately prior to the revised Conceptual Framework being issued which are not updated.

Up to two sets of Australian Accounting Standards.

The reporting entity clash

Addressed in Phase 1, by inserting paragraph AusCF1 into each Australian Accounting Standard that contains the term reporting entity. Paragraph AusCF1 would direct other entities to AASB 1057[3] (and SAC 1) for the definition of the term reporting entity.

Addressed in Phase 1, by inserting paragraph AusCF1 into each Australian Accounting Standard that contains the term reporting entity. Paragraph AusCF1 would direct other entities to AASB 1057 (and SAC 1) for the definition of the term reporting entity.

Tolerated in Phase 1. That is, unlike in Option 1, it would not be addressed via an AusCF1 paragraph.

Tolerated in Phase 1. That is, unlike in Option 2, it would not be addressed via an AusCF1 paragraph.

[3] AASB 1057 Application of Australian Accounting Standards

BC35If Option 1 was adopted, it would result in two conceptual frameworks. The revised Conceptual Framework would be applied by for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards. Other for-profit entities could elect to apply the revised Conceptual Framework voluntarily. All other entities would continue to apply the existing Conceptual Framework. To operate two conceptual frameworks with only one set of Australian Accounting Standards (including Interpretations), the basic text of each Australian Accounting Standard would be updated for consistency with the IASB’s consequential amendments. The existing, pre-amendment text would also be retained, with the paragraph or footnote given an ‘AusCF’ prefix. Australian Accounting Standards that do not have an equivalent IFRS Standard and future consequential amendments would be addressed in the same way. To address the reporting entity clash, entities applying the revised Conceptual Framework would no longer apply the reporting entity concept in SAC 1. Instead, these entities would refer to Chapter 3 of the revised Conceptual Framework to determine what the term reporting entity means for them. Entities applying the existing Conceptual Framework would continue referring to the reporting entity definition in AASB 1057 and SAC 1.

BC36If Option 2 was adopted, it would result in the revised Conceptual Framework being applied either in full or in part by all entities. For-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards would adopt the revised Conceptual Framework in full. Other for-profit entities could also elect to do so voluntarily. All other entities would apply the revised Conceptual Framework, except for Chapter 3. Instead, these entities would refer to SAC 1 for the definition of the term reporting entity. This would address the reporting entity clash.

BC37Option 3 is similar to Option 1 as it would result in two conceptual frameworks, however unlike Option 1, Option 3 would result in two sets of Australian Accounting Standards. One set would be amended for entities adopting the revised Conceptual Framework. The second set would be frozen at the date the revised Conceptual Framework was issued, and would be applied by entities continuing to apply the existing Conceptual Framework. Option 3 would not address the reporting entity clash.

BC38Option 4 is similar to Option 2, as it would result in a single conceptual framework, however similarly to Option 3, it would result in up to two sets of Australian Accounting Standards. Option 4, like Option 3, would not address the reporting entity clash.

BC39While Option 1 results in there being two conceptual frameworks in operation for a period of time and does not resolve the reporting entity clash in the immediate term, the Board decided that it was the most appropriate Phase 1 approach for the following reasons:

(a) the application of the two conceptual frameworks is clearly defined and is less likely to cause confusion for constituents;

(b) Option 1 would address the reporting entity clash in the medium term;

(c) Option 1 would be more straightforward to unwind when implementing Phase 2;

(d) the revised Conceptual Framework contains new recognition and measurement requirements for assets, liabilities, income and expenses. Unless an entity is applying the revised Conceptual Framework, it is not required to adopt those revised recognition and measurement requirements until Phase 2 is implemented. That is, for entities applying the existing Conceptual Framework, the existing Conceptual Framework and the related references in Australian Accounting Standards are effectively frozen; and

(e) there is no need to consider whether other aspects of the revised Conceptual Framework need to be amended to accommodate retaining SAC 1, which includes the Australian definition of the term reporting entity.

BC40While Option 2 would result in a single conceptual framework, and would address the reporting entity clash, the Board decided that Option 2 was more likely to create confusion amongst constituents. This is because under Option 2 it is less clear which elements of the revised Conceptual Framework would apply to certain entities and which would not. Also, other entities would be required to apply the new recognition and measurement requirements in the revised Conceptual Framework in circumstances where an Australian Accounting Standard (or Interpretation) did not address an issue. In addition, extensive work would be required to review all aspects of the revised Conceptual Framework to determine what other changes would be necessary to accommodate retaining SAC 1 and the Australian definition of the term reporting entity.

BC41The Board did not consider Option 3 or Option 4 to be viable, as both options would result in two sets of Australian Accounting Standards, which would be complex to manage (for example future compilations) and would present a much greater level of confusion for stakeholders in knowing which set of Australian Accounting Standards they should use. The existence of two sets of Australian Accounting Standards would also be challenging when implementing Phase 2.

Phase 1 approach

BC42Implementation of Option 1 in Phase 1 requires identification of all references to the existing Conceptual Framework in each Australian pronouncement and all references to the term reporting entity.

BC43Implementation of two conceptual frameworks and one set of Australian Accounting Standards requires all references to the existing Conceptual Framework to be updated as references to the revised Conceptual Framework, with limited exceptions, for those entities applying the revised Conceptual Framework. For all entities that are not applying the revised Conceptual Framework, references to the existing Conceptual Framework need to be retained.

BC44The Board determined the most effective way to achieve this required:

(a) updating the basic text of all Australian Accounting Standards to reflect the IASB’s amendments consequential to the revised Conceptual Framework, that is, all references to the existing Conceptual Framework were replaced with a reference to the revised Conceptual Framework, with limited exceptions. The basic text of all Australian Accounting Standards applies to entities applying the revised Conceptual Framework. This ensures that compliance with Australian Accounting Standards (Tier 1) by these entities continues to result in compliance with IFRS Standards;

(b) adding an AusCF paragraph or footnote in each Australian Accounting Standard that was updated per paragraph (a). The AusCF paragraph or footnote retained the same number, but was given an AusCF prefix. AusCF paragraphs retained the references to the existing Conceptual Framework and are applicable only to entities applying the existing Conceptual Framework; and

(c) inserting an AusCF1 paragraph into each Australian Accounting Standard that contained a reference to the existing Conceptual Framework or contained the term ‘reporting entity’. Two versions of paragraph AusCF1 were used:

(i) one version states that the requirements of the AusCF paragraphs and footnotes added to the Standard apply only to those entities that are applying the existing Conceptual Framework. It also directs entities applying the existing Conceptual Framework to AASB 1057 and SAC 1 for the definition of the term ‘reporting entity’; and

(ii) a second version is used where no other AusCF paragraphs or footnotes were added to the Standard but the Standard contains the term ‘reporting entity’. This version merely directs entities applying the existing Conceptual Framework to AASB 1057 and SAC 1 for the definition of the term ‘reporting entity’.

BC45To maintain IFRS compliance, there are some instances where it is not necessary or not appropriate to update a reference to the existing Conceptual Framework to a reference to the revised Conceptual Framework (these references were not updated in the consequential amendments made by the IASB to IFRS Standards). These include:

(a) references to the existing Conceptual Framework in AASB 3 Business Combinations (paragraph 11), AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors (paragraph 54G) in relation to developing accounting policies for regulatory balances, AASB 137 Provisions, Contingent Liabilities and Contingent Assets (paragraph 10) and AASB 138 Intangible Assets (paragraph 8) continue to use the definition of a liability and an asset contained in the existing Conceptual Framework;

(b) an existing Conceptual Framework reference that presents the definition of an asset, liability, income or expense in its requirements, so that updating the reference may potentially change the accounting consequences of the Australian Accounting Standard. In these cases, the Australian Accounting Standard will continue to refer to the existing Conceptual Framework for the relevant definition; and

(c) references to the existing Conceptual Framework in Interpretations, which the IASB amended to refer to the Conceptual Framework in effect when the Interpretation was developed. Consequently, the Board also amended the references to the existing Conceptual Framework in its Australian Interpretations to refer to the Conceptual Framework in effect when the Interpretation was developed.

References to the existing Conceptual Framework that are historical (ie fixed in time) rather than required to update automatically for subsequent versions of the Conceptual Framework do not include the reference to identification in accordance with AASB 1048 Interpretation of Standards. Such a reference to AASB 1048 would automatically update the reference to the Conceptual Framework when a new version of the Conceptual Framework is listed in AASB 1048. Most references to the existing and revised Conceptual Frameworks therefore include the AASB 1048 reference.

BC46Existing Conceptual Framework references contained in requirements specific to not-for-profit entities were also not updated. Although amendments will be made to the revised Conceptual Framework for not-for-profit entities in due course, they have not yet been considered as the adoption of the revised Conceptual Framework in Phase 1 is limited to for-profit entities.

BC47Based on feedback received on ITC 39, the Board noted that AASB 1053 paragraph 11 regarding the application of Tier 1 reporting requirements is not operating as intended to require entities with public accountability to prepare general purpose financial statements. The Board determined that the amended requirement would be limited to those entities scoped into Phase 1 to avoid unintended consequences.

Public sector entities

BC48The definition of public accountability in IFRS for SMEs was developed by the IASB for for-profit private sector entities. When discussing AASB 1053, the Board considered whether the definition of public accountability should also be applied to public sector entities. However, the Board decided against this for the following reasons:

The Board concluded that, consistent with the role of other regulators under the revised differential reporting framework (see paragraphs BC40-BC41), the determination of the Tiers of reporting requirements under which for-profit public sector entities should report would best be left to relevant public sector regulators in each jurisdiction. (AASB 1053, paragraph BC38).

The Board did not consider that there was any reason to revisit this decision.

BC49When discussing the application of Phase 1 of ITC 39 to entities in the public sector, the Board did not intend to force any for-profit public sector entity to adopt the revised Conceptual Framework for periods beginning on or after 1 January 2020. The Phase 1 amendments are intended to allow for-profit public sector entities to apply the revised Conceptual Framework and continue stating compliance with IFRS Standards where they elect to do so.

BC50For these reasons, the Board decided that Phase 1 should also apply to for-profit public sector entities that elect to apply the revised Conceptual Framework, in addition to for-profit private sector entities that have public accountability and are required by legislation to comply with Australian Accounting Standards.

BC51The Board decided that it would pursue financial reporting reform in the public sector via consultation based on the AASB Discussion Paper Improving Financial Reporting for Australian Public Sector, which was issued in June 2018.

Further consultation

BC52In December 2017 and February, September and November 2018, the Board considered issues papers and drafts of the Standard which were published as Board agenda papers for the public. This gave stakeholders the opportunity to follow the project and to comment on the issues contemporaneously.

BC53At its meeting in November 2018, the Board decided to finalise its decisions to address the issues raised by stakeholders. Whilst the substance of the Board’s decisions is consistent with the proposals in ITC 39, the Board decided that the new approach to highlighting which entities apply which conceptual framework and to the scope restrictions warranted the issue of a limited-scope consultative document presenting the proposed consequential amendments to Australian Accounting Standards (including Interpretations) and other pronouncements. A fatal-flaw review version of the proposed amending Standard was issued for comment in January 2019.

BC54The Board received four submissions on the fatal-flaw review version. The responses in general supported the issue of the amending Standard to finalise the Phase 1 consequential amendments alongside the issue of the revised Conceptual Framework, although one respondent preferred that two conceptual frameworks were both on issue for only a limited period of time and one preferred only one conceptual framework to be on issue. Some of the submissions raised matters of detail regarding the consequential amendments, which were addressed in finalising the amending Standard.