Explanatory Statement

Accounting Standard AASB 1048
Interpretation of Standards

December 2013

EXPLANATORY STATEMENT

Reasons for Issuing AASB 1048

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

AASB 1048 clarifies that all Australian Interpretations have the same authoritative status.  Those that incorporate 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. 

AASB 1048 also updates references in other Standards to the Framework for the Preparation and Presentation of Financial Statements (July 2004) to subsequent versions.

Need for a Service Standard

Australian Interpretations

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 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 a Standard can refer only 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, a Standard can refer to a second 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 reissued since the first Standard was issued.

The service Standard approach, as applied to Australian Interpretations, involves issuing AASB 1048 to list the Australian Interpretations, and referring to it in every other Standard where necessary to refer to an Interpretation.  This enables references to the Interpretations in all other Standards to be updated by reissuing AASB 1048.

This approach preserves the status of Australian Interpretations as ‘external documents’ referred to in a Standard.  It does not treat the Interpretations as delegated legislation or confer ambulatory status on the reference.  In each Standard where there is a need to refer to an Australian Interpretation, the reference will be to AASB 1048, phrased as “Interpretation [number] [title] as identified in AASB 1048” (or similar).  This reference, being to another Standard, is ambulatory and will refer to the version of 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 reissued periodically.

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.

Australian Conceptual Framework

In the Australian context, an Australian conceptual framework pronouncement, such as the Framework for the Preparation and Presentation of Financial Statements (Framework), also does not have the same legal status as a Standard (delegated legislation) and, like Interpretations, is treated as an ‘external document’ by the Acts Interpretation Act 1901 and the Legislative Instruments Act 2003. 

The service Standard approach, as applied to the Australian conceptual framework, involves issuing AASB 1048 to update references to the Framework in other Standards.  This approach preserves the status of the Framework as an ‘external document’ referred to in a Standard.  It does not treat the Framework as delegated legislation or confer ambulatory status on the reference.

Main Features of AASB 1048

AASB 1048 (December 2013) supersedes the previous version of AASB 1048, issued in June 2012 (as amended).

Application Date

AASB 1048 is applicable to annual reporting periods ending on or after 20 December 2013.  To be consistent with the position for IFRSs as adopted in Australia, early adoption of this Standard is not permitted for annual reporting periods beginning before 1 January 2005.  However, early adoption is otherwise permitted, under certain conditions.

Main Requirements

AASB 1048 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 statements that are within the scope of the Standard.

In respect of the first group (listed in Table 1 of AASB 1048), 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 the SIC Interpretations.

The second group (listed in Table 2 of AASB 1048) comprises the other Australian Interpretations, which do not correspond to the IASB Interpretations, to assist financial statement preparers and users to identify the other authoritative pronouncements necessary for compliance in the Australian context.

AASB 1048 (refer Table 3 of AASB 1048) also updates references to the Framework for the Preparation and Presentation of Financial Statements (July 2004) in other Standards to refer to an amended version of the Framework, as identified in AASB 1048.

AASB 1048 will be reissued when necessary to keep the Tables up to date.

Changes from AASB 1048 (June 2012)

The main differences between the previous version of AASB 1048 and this version include:

(a)  the removal from Tables 1 and 2 of the versions of Interpretations that do not apply to any of the reporting periods to which this Standard mandatorily applies.  This includes the removal of Interpretation 121 Income Taxes – Recovery of Revalued Non-Depreciable Assets, which was superseded by AASB 112 Income Taxes for annual reporting periods beginning on or after 1 January 2012;

(b) the addition of one Interpretation incorporating an IFRIC Interpretation to Table 1, as set out in the following table:

(c) the addition of amended versions of Interpretations to Table 1 and Table 2, where applicable to any reporting period to which AASB 1048 mandatorily applies.  This reflects amended versions of Interpretations arising in relation to amendments to AASB 9 Financial Instruments and the Framework, the deferral of the consequential amendments for not-for-profit entities of AASB 10 Consolidated Financial Statements and related Standards, and the revised AASB 1031 Materiality issued in December 2013; and

(d) the addition of a section to update references to the Framework in other Standards to an amended version of the Framework.

Consultation Prior to Issuing AASB 1048

Public consultation was carried out in developing:

(a) the AASB’s submission on Draft IFRIC Interpretation DI/2012/1 Levies Charged by Public Authorities on Entities that Operate in a Specific Market, issued by the IFRS Interpretations Committee for public comment.  The AASB received three submissions from Australian constituents.  The IFRS Interpretations Committee considered the comments submitted on the draft Interpretation before finalising Interpretation 21; 

(b) the various amending Standards that resulted in the amended versions of Interpretations that have been added to Tables 1 and 2 of AASB 1048.  An Explanatory Statement accompanied each of those amending Standards; and 

(c) the amending document AASB CF 2013-1 Amendments to the Australian Conceptual Framework that resulted in the amended versions of Interpretations that have been added to Tables 1 and 2 of AASB 1048.  The AASB issued AASB Exposure Draft ED 164 An improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information  (which incorporated the IASB exposure draft of the same name) for public comment in June 2008.  The AASB received five submissions from Australian constituents on ED 164, who raised various issues for consideration.  The AASB considered the comments it received on ED 164 in developing its submission to the IASB, and the IASB considered those comments before issuing its revised Framework.  The AASB then adapted that IASB revised Framework to the Australian context, having regard to the comments it received on ED 164.

A Regulation Impact Statement has not been prepared specifically in connection with the issue of AASB 1048 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.

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011

Accounting Standard AASB 1048 Interpretation of Standards

Overview of the Accounting Standard

AASB 1048 clarifies that all Australian Interpretations have the same authoritative status and updates references in other Standards to Australian Interpretations or to the Framework for the Preparation and Presentation of Financial Statements (July 2004) to subsequent versions.

Human Rights Implications

This Standard is issued by the AASB in furtherance of the objective of facilitating the Australian economy.  It does not diminish or limit any of the applicable human rights or freedoms, and thus does not raise any human rights issues.

Conclusion

This Standard is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.