Explanatory Statement

AASB 2006-4 Amendments to Australian Accounting Standards

December 2006

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) Interpretations issued by the AASB corresponding to the Interpretations adopted by the IASB, as listed in AASB 1048 Interpretation and Application of Standards. 

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.  

Reasons for Issuing AASB 2006-4

AASB 2006-4 is an amending Standard which makes amendments to AASB 134 Interim Financial Reporting.  The purpose of the amendments is to remove an inconsistency over the status of the financial reports of the General Government Sector (GGS), created with the issuance of AASB 1049 Financial Reporting of General Government Sectors by Governments.  AASB 134 comments on interim financial reports that are widely available but lack the characteristics of general purpose financial reports and cites as an example monthly or quarterly reports for the GGS.  AASB 1049 is silent on the question of whether a GGS financial report is a general purpose financial report.      

Main Features of the Standard

This Standard (issued in December 2006) amends the previous version of AASB 134, issued in June 2005.  At its meeting in December 2006, the AASB agreed to amend AASB 134 to specifically scope the interim financial reports of the General Government Sector out of this Standard.

Application Date

This Standard is applicable to interim financial reporting periods ending on or after 31 December 2006 (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. 

Main Requirements

To remove the inconsistency between AASB 134 and AASB 1049, the AASB decided to amend AASB 134 by deleting the second last sentence of paragraph Aus1.3.  In addition, the AASB has added paragraph Aus2.1 to explicitly scope GGS interim financial reports out of AASB 134.   

Consultation Prior to Issuing this Standard

Given the non-substantive nature of the amendments, consultation was limited to attaining the views of a representative selection of knowledgeable constituents with an interest in reporting by GGSs.  All of those who were consulted agreed with making the amendments. 

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 and clarify existing requirements.