Explanatory Statement
AASB 2005-11 Amendments to Australian Accounting Standards
September 2005
EXPLANATORY STATEMENT
Adoption of Australian equivalents to IFRSs
The Australian Accounting Standards Board (AASB) is implementing the directive of the Financial Reporting Council (FRC) to adopt the Standards of the International Accounting Standards Board (IASB), for application to reporting periods beginning on or after 1 January 2005.
The IASB defines International Financial Reporting Standards (IFRSs) as comprising:
(a) International Financial Reporting Standards;
(b) International Accounting Standards (IAS); and
(c) Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).
The Australian equivalents to IFRSs are:
(a) Accounting Standards issued by the AASB that are equivalent to Standards issued by the IASB, being AASBs 1 – 99 corresponding to the IFRS series and AASBs 101 – 199 corresponding to the IAS series; and
(b) Urgent Issues Group (UIG) Interpretations issued by the AASB corresponding to the Interpretations adopted by the IASB, as listed in AASB 1048 Interpretation and Application of Standards.
In implementing the FRC’s directive, the AASB is replacing relevant existing AASB Standards with Australian Standards equivalent to those of the IASB. The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities. Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB uses the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment. Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues.
On 15 July 2004, the Board made the set of Australian Standards equivalent to IFRSs, together with several associated Australian Standards, effective for annual reporting periods beginning on or after 1 January 2005.
The following Standards were amended for editorial corrections to reflect changes made to their IASB counterpart Standards:
1. AASB 101 Presentation of Financial Statements;
2. AASB 112 Income Taxes;
3. AASB 132 Financial Instruments: Presentation;
4. AASB 133 Earnings per Share;
5. AASB 139 Financial Instruments: Recognition and Measurement; and
6. AASB 141 Agriculture.
Reasons for Issuing AASB 2005-11
AASB 2005-11 is an amending standard which makes editorial corrections to AASB 101, AASB 112, AASB 132, AASB 133, AASB 139 and AASB 141. Most of the editorial corrections correspond to corrections identified by the IASB in IASB Corrections to Bound Volume 2004 (issued by the IASB on
8 June 2005). The exception is the amendment to AASB 139 which corrects an editorial error made in a consequential amendment to the Standard by amending standard AASB 2005-4.
Main Features of this Standard
This Standard was made by the AASB on 8 September 2005 under
section 334 of the Corporations Act 2001.
Application Date
This Standard is applicable to annual reporting periods ending on or after 31 December 2005 with early adoption permitted for annual reporting periods that begin on or after 1 January 2005 and end before 31 December 2005.
Main Changes
The changes that were made in this Standard are purely editorial and do not amount to a substantial change to existing Standards.
Consultation prior to Issuing this Standard
No public consultation in respect of this Standard was undertaken, as the errors identified were purely editorial.
A Regulatory Impact Statement has not been prepared in connection with the revision of this Standard as the amendments it makes do not have a direct, or substantial indirect, effect on business or restrict competition, are of a minor or machinery nature and do not substantially alter existing arrangements.
Overview
The Australian Accounting Standards Board (AASB) issued AASB 2005-11 in September 2005, amending Australian Accounting Standards to align with editorial corrections made to their International Financial Reporting Standards (IFRS) counterparts. This act was introduced to ensure that Australian financial reporting standards are consistent with international standards and to correct minor editorial errors that did not affect the substantive requirements of the standards. The AASB enacted this standard under section 334 of the Corporations Act 2001, aiming to maintain the integrity and comparability of financial statements across jurisdictions. This amending standard is applicable to annual reporting periods ending on or after 31 December 2005, with early adoption permitted for periods beginning on or after 1 January 2005. The policy objective is to refine the clarity and accuracy of financial reporting standards without imposing significant changes or additional burdens on entities.
Scope and Application
The AASB 2005-11 Amendments to Australian Accounting Standards, which includes editorial corrections to several Australian Accounting Standards, applies to entities that prepare financial reports in accordance with Australian Accounting Standards. These entities encompass both for-profit and not-for-profit organisations, including public sector entities, and are required to apply the amended Standards in their financial reports for annual reporting periods ending on or after 31 December 2005, with early adoption permitted for periods beginning on or after 1 January 2005. The amendments pertain to AASB 101 Presentation of Financial Statements, AASB 112 Income Taxes, AASB 132 Financial Instruments: Presentation, AASB 133 Earnings per Share, AASB 139 Financial Instruments: Recognition and Measurement, and AASB 141 Agriculture, reflecting editorial corrections corresponding to changes made by the IASB. The AASB, in making these amendments, has ensured that the Standards continue to be sector-neutral, applicable to all entities except those specific to the not-for-profit or public sectors or of a purely domestic nature. The amendments are limited to editorial corrections and do not alter the substance of the Standards.
Key Provisions
The AASB 2005-11 Amendments to Australian Accounting Standards, issued on 8 September 2005 under section 334 of the Corporations Act 2001, are primarily concerned with making editorial corrections to several existing accounting standards. These amendments apply to annual reporting periods ending on or after 31 December 2005, with early adoption permitted for periods beginning on or after 1 January 2005 and ending before 31 December 2005 (Section 334). The standards affected by these amendments include AASB 101 Presentation of Financial Statements, AASB 112 Income Taxes, AASB 132 Financial Instruments: Presentation, AASB 133 Earnings per Share, AASB 139 Financial Instruments: Recognition and Measurement, and AASB 141 Agriculture. The primary purpose of these amendments is to correct editorial errors identified in the corresponding International Accounting Standards Board (IASB) standards, aligning the Australian standards more closely with their international counterparts.
The obligations imposed by AASB 2005-11 are largely procedural. Entities subject to these standards are required to review and ensure that their financial statements and related disclosures comply with the amended standards. This involves updating accounting systems and practices to reflect the editorial corrections, ensuring that any prior period adjustments are properly accounted for and disclosed, and ensuring that the financial statements are presented in accordance with the requirements of AASB 101. Additionally, entities must ensure that any references to the amended standards in their financial reports are accurate and reflect the changes made.
There are no specific offences or penalties outlined in AASB 2005-11 for non-compliance with the amendments. However, entities that fail to comply with the requirements of the Australian Accounting Standards, including the amended standards, may face consequences under the Corporations Act 2001. Non-compliance could result in the financial statements being deemed misleading or deceptive, which could lead to legal action against the directors or officers of the entity. Furthermore, entities that fail to comply with the accounting standards may be subject to regulatory scrutiny and potential penalties under other sections of the Corporations Act 2001, such as those related to false or misleading statements and failure to comply with financial reporting obligations.