Explanatory Statement

Accounting Standard AASB 1048 Interpretation and Application
of Standards

March 2009

EXPLANATORY STATEMENT

Reasons for Issuing AASB 1048

Australian Accounting Standards that apply to annual reporting periods beginning on or after 1 January 2005 include International Financial Reporting Standards (IFRSs).  IFRSs comprise Accounting Standards and Interpretations.  IFRSs are issued by the International Accounting Standards Board (IASB), and their adoption in Australia is in accordance with a strategic direction made by the Financial Reporting Council (FRC).

This Standard clarifies that all Australian Interpretations have the same authoritative status.  Those that are equivalent to the IASB Interpretations must be applied to achieve compliance with IFRSs.  Australian Interpretations issued by the AASB comprise both AASB and UIG Interpretations.  UIG Interpretations were developed by the Urgent Issues Group, a former committee of the AASB.

Need for a Service Standard

In the Australian context, Australian Interpretations do not have the same legal status as Standards (delegated legislation) and are treated as ‘external documents’ by the Acts Interpretation Act 1901 (and also by the Legislative Instruments Act 2003).  Although references in one Standard to a second Standard are ambulatory (automatically moving forward to refer to the most recently-issued version of the second Standard), references in a Standard to external documents are stationary (being fixed in time to refer to the contents of the external document when the Standard was issued).  A simple reference to an Australian Interpretation in an AASB Standard can only refer to the Interpretation that existed when the Standard was issued.  It cannot refer to any revised version of the Interpretation that may exist at a later reporting date.  However, an AASB Standard can refer to a second AASB Standard and, when the first Standard is applied at a later reporting date, the reference will be to the then-current version of the second Standard, even if it has been re-issued since the first Standard was issued.

The service Standard approach involves issuing an AASB Standard – this Standard – that lists the Australian Interpretations, and referring to that Standard in every other AASB Standard where necessary to refer to an Interpretation.  This enables references to the Interpretations in all other AASB Standards to be updated by re-issuing the service Standard.

This approach preserves the status of Australian Interpretations as ‘external documents’ referred to in a Standard, with the contents fixed in time to that existing when the Standard takes effect.  It does not treat the Interpretations as delegated legislation or confer ambulatory status on the reference.  In each AASB Standard where there is a need to refer to an Australian Interpretation that adopts an IFRIC Interpretation, the reference will be to this Standard, phrased as “Interpretation [number] [title] identified in AASB 1048 as corresponding to IFRIC [or SIC] [number]”.  This reference, being to another AASB Standard, is ambulatory and will refer to the Standard, AASB 1048, that is in force from time to time.  AASB 1048 itself will contain the direct references to the external documents and will be re-issued to keep all references to Interpretations in the other Standards up to date.

This approach to clarifying the status of Australian Interpretations ensures there is no difference between the status in the hierarchy accorded to Interpretations in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors compared with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.

Main Features of this Standard

This Standard (issued in March 2008) supersedes the previous version of AASB 1048, issued in September 2008. 

At its December 2008 meeting, the AASB approved Interpretation 17 Distributions of Non-cash Assets to Owners and Interpretation 18 Transfers of Assets from Customers was approved it its March 2009 meeting.  These interpretations are now referred to in the Standard.

Application Date

This Standard is applicable to annual reporting periods ending on or after 31 March 2009 (see paragraph 3).  To be consistent with the position for AASB Standards equivalent to IFRSs, early adoption of this Standard is not permitted for annual reporting periods beginning before 1 January 2005.  However, early adoption is otherwise permitted as specified in paragraphs 4, 10 and 12.

Main Requirements

This Standard identifies the Australian Interpretations and classifies them into two groups:  those that correspond to an IASB Interpretation and those that do not.  Entities are required to apply each relevant Australian Interpretation in preparing financial reports that are within the scope of the Standard.  Australian Interpretations are issued by and may be purchased from the AASB.  They are also available on the AASB’s website at www.aasb.gov.au.

In respect of the first group (Table 1), it is necessary for those Australian Interpretations, where relevant, to be applied in order for an entity to be able to make an explicit and unreserved statement of compliance with IFRSs.  The IASB defines IFRSs to include the IFRIC and SIC Interpretations.

In the second group (Table 2), this Standard lists the other Australian Interpretations, that do not correspond to the IASB Interpretations, to assist financial report preparers and users to identify the other authoritative pronouncements necessary for compliance in the Australian context.

The Standard will be re-issued when necessary to keep the Tables up to date.

Changes from AASB 1048 (September 2008)

The main differences between AASB 1048 (as issued in September 2008) and this version issued in March 2009 are the addition of two Interpretations based on IFRIC Interpretations to Table 1 in paragraph 9 of the Standard. 

Consultation Prior to Issuing this Standard

Public consultation was sought as part of the process in developing the AASB’s submissions on Draft Interpretations D23 Distributions of Non-cash Assets and D24 Customer Contributions issued by the IFRIC for public comment.  IFRIC Interpretation 17 contains essentially the same requirement as D23 but is also it clarifies that a dividend payable is recognised when it is appropriately authorised and is no longer at the discretion of the entity.  IFRIC Interpretation 18 differs from D24 in that it requires revenue to be recognised in respect of transfers of assets from customers as each separately identifiable service specified in the agreement with the customer (such as connecting the customer to a network, providing the customer with ongoing access to a supply of goods or serves, or both) is provided.  Australian constituents and the AASB urged the IFRIC to make this change.  In contrast, D24 proposed that such revenue should only be recognised over the period during which the entity provided the customer with ongoing access to a supply of goods or services using the transferred asset, which was not supported by the AASB.  No further public consultation was sought on this change.

A Regulatory Impact Statement has not been prepared in connection with the issue of this Standard as the amendments made do not have a substantial direct or indirect impact on business or competition, are of a minor or machinery nature or clarify existing requirements.