Explanatory Statement
Accounting Standard AASB 2007-1 Amendments to Australian
Accounting Standards arising from AASB Interpretation 11
February 2007
EXPLANATORY STATEMENT
Reasons for Issuing AASB 2007-1
The Standard makes amendments to Australian Accounting Standard AASB 2 Share-based Payment.
These amendments arise from the approval in February 2007 of AASB Interpretation 11 AASB 2 – Group and Treasury Share Transactions, which is the Australian equivalent of International Financial Reporting Interpretations Committee (IFRIC) Interpretation 11.
Main Features of the Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 March 2007. Early adoption is permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 March 2007. Early adoption is required for such a period if AASB Interpretation 11 AASB 2 – Group and Treasury Share Transactions is applied to the period.
Main Requirements
The amendments arise from the approval of AASB Interpretation 11. The transitional provisions in IFRIC Interpretation 11 state that that Interpretation would be applied retrospectively, subject to the transitional provisions of International Financial Reporting Standard IFRS 2 Share-based Payment. As AASB 2, the Australian equivalent of IFRS 2, does not include corresponding transitional provisions, this Standard amends AASB 2 to insert those provisions. This allows AASB Interpretation 11 to have the same transitional provisions as IFRIC Interpretation 11.
When the AASB issued AASB 2 in July 2004 in implementing the Financial Reporting Council’s policy of adopting the Standards of the International Accounting Standards Board, the transitional provisions of IFRS 2 were not included because AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards set out the transition requirements. No application was foreseen for transitional provisions in AASB 2 itself.
Consultation Prior to Issuing this Standard
Public consultation was part of the process undertaken by the Urgent Issues Group (a former committee of the AASB) in developing a submission on the Draft Interpretation D17 IFRS 2 – Group and Treasury Share Transactions, which was issued by the IFRIC in 2005 for public comment. IFRIC Interpretation 11 was developed from this Draft Interpretation. The IFRIC process for developing the Interpretation on the basis of the Draft Interpretation was publicly reported over a long period, giving Australian entities the opportunity to contribute to the debate on the issues.
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.
Overview
The AASB 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11, enacted in February 2007, was introduced to address the need to align Australian Accounting Standards with international standards and interpretations concerning share-based payment transactions, particularly those involving group and treasury share transactions. This legislation was enacted by the Australian Accounting Standards Board, reflecting the Australian government's policy of converging Australian accounting standards with International Financial Reporting Standards. The primary objective of this amendment was to ensure that Australian companies could apply the same transitional provisions for group and treasury share transactions as those stipulated in the International Financial Reporting Interpretations Committee’s Interpretation 11. This alignment was necessary to maintain consistency and comparability in financial reporting across international boundaries.
Scope and Application
The AASB 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11 applies to entities that are required to comply with Australian Accounting Standards, specifically those involved in share-based payment transactions. This Act is applicable to annual reporting periods beginning on or after 1 March 2007, with early adoption permitted for periods starting from 1 January 2005. The legislation aims to align Australian Accounting Standard AASB 2 with the transitional provisions of AASB Interpretation 11, which itself is based on IFRIC Interpretation 11. This ensures that Australian standards are consistent with international practices regarding group and treasury share transactions. While the amendments are primarily focused on clarifying and implementing transitional provisions, they are of a minor nature and do not substantially impact business operations or competition. The Act extends its reach to any entity subject to Australian Accounting Standards, thereby affecting a broad range of industries, particularly those engaged in complex financial reporting.
Key Provisions
The key operative sections of AASB 2007-1 (Section 1) pertain to the amendments of Australian Accounting Standard AASB 2 Share-based Payment. These amendments are a direct result of the approval of AASB Interpretation 11 AASB 2 – Group and Treasury Share Transactions, which was approved in February 2007. This interpretation is the Australian equivalent of IFRIC Interpretation 11, which addresses group and treasury share transactions. The standard is designed to ensure that AASB Interpretation 11 can be applied retrospectively, aligning it with the transitional provisions of IFRIC Interpretation 11.
The standard imposes specific obligations on entities that must comply with AASB 2 Share-based Payment. Firstly, entities are required to adopt the transitional provisions set out in AASB 2007-1, which are aligned with the transitional provisions of IFRIC Interpretation 11. This ensures that any adjustments resulting from the adoption of AASB Interpretation 11 are correctly reflected in financial statements. Entities must also ensure that these transitional provisions are applied retrospectively, unless a specific exemption applies, in order to maintain consistency and accuracy in financial reporting.
The legislation does not explicitly outline specific offences or penalties for non-compliance with AASB 2007-1. However, failure to adhere to the requirements of AASB 2 and its amendments could potentially result in inaccurate financial reporting, which may lead to regulatory scrutiny or enforcement actions by the Australian Securities and Investments Commission (ASIC). The consequences of non-compliance may include financial penalties, legal action, and reputational damage, although these are not explicitly stated in the explanatory statement. Instead, the focus is on ensuring that entities comply with the standard to maintain the integrity of financial reporting.