Explanatory Statement
Accounting Standard AASB 2007-10 Further Amendments to Australian Accounting Standards arising from AASB 101
December 2007
EXPLANATORY STATEMENT
Reasons for Issuing AASB 2007-10
This Standard amends Australian Accounting Standards (including Interpretations) and the Framework for the Preparation and Presentation of Financial Statements.
These amendments arise from the issuance in September 2007 of a revised AASB 101 Presentation of Financial Statements, as a result of the issuance by the IASB of a revised IAS 1 Presentation of Financial Statements.
Main Features of AASB 2007-10
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 January 2009. Early adoption is permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009, provided that the revised AASB 101 is also adopted for the same period. This Standard is applied when the revised AASB 101 is applied.
Main Requirements
This Amending Standard changes the term ‘general purpose financial report’ to ‘general purpose financial statements’ and the term ‘financial report’ to ‘financial statements’, where appropriate, in Australian Accounting Standards (including Interpretations) and the Framework to better align with IFRS terminology.
This Standard builds on the changes made by AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101, which changed the terms in the application paragraphs of Australian Accounting Standards (including Interpretations) and the Framework.
Consultation Prior to Issuing AASB 2007-10
The AASB issued ED 148 Proposed Amendments to AASB 101 Presentation of Financial Statements: A Revised Presentation in April 2006. ED 148 contained the IASB’s Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation, as well as the AASB’s own proposals to amend AASB 101 to remove differences from IAS 1.
As part of this process, the AASB has decided to undo its previous practice of substituting ‘financial report(s)’ for the IASB term ‘financial statements’ within AASB 101. AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101 changes the term ‘financial report(s)’ to ‘financial statements’ in the application paragraphs of Australian Accounting Standards (including Interpretations). AASB 2007-10 changes the remaining instances of ‘financial report(s)’ to ‘financial statements’ in Australian Accounting Standards (including Interpretations), where appropriate.
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 Accounting Standard AASB 2007-10, issued in December 2007, was introduced to address the need for further amendments to Australian Accounting Standards arising from the revised AASB 101 Presentation of Financial Statements. This standard aligns Australian terminology with International Financial Reporting Standards (IFRS) by changing references to 'general purpose financial report' and 'financial report' to 'general purpose financial statements' and 'financial statements' respectively. This alignment aims to ensure consistency and clarity in financial reporting. The Australian Accounting Standards Board (AASB) enacted this amendment, and the policy objective was to harmonise Australian accounting standards with international practices, thereby facilitating better comparability and transparency of financial statements. Early adoption of the standard was permitted for periods beginning on or after 1 January 2005, but before 1 January 2009, provided that the revised AASB 101 was also adopted.
Scope and Application
The AASB 2007-10 Further Amendments to Australian Accounting Standards arising from AASB 101 applies to entities that prepare and present financial statements in accordance with Australian Accounting Standards, including Interpretations, and the Framework for the Preparation and Presentation of Financial Statements. This encompasses a broad range of entities, including for-profit businesses, not-for-profit organisations, and government entities. The standard is designed to ensure consistency and alignment with the International Financial Reporting Standards (IFRS) terminology. It is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for periods starting between 1 January 2005 and 31 December 2008, provided that the revised AASB 101 is also adopted. The application of AASB 2007-10 is jurisdictional across Australia, as it is issued by the Australian Accounting Standards Board (AASB), a Commonwealth body. The standard itself does not provide for specific exclusions, exemptions, or thresholds, but entities must ensure that they meet the requirements when preparing and presenting their financial statements. The scope of application may be further defined or extended through subordinate instruments issued by the AASB.
Key Provisions
The AASB 2007-10 Further Amendments to Australian Accounting Standards arising from AASB 101, effective for annual reporting periods beginning on or after 1 January 2009, primarily serves to harmonise the terminology used in Australian Accounting Standards with that of International Financial Reporting Standards (IFRS). The standard mandates changes to terminology within Australian Accounting Standards and the Framework for the Preparation and Presentation of Financial Statements, replacing the term ‘general purpose financial report’ with ‘general purpose financial statements’, and ‘financial report’ with ‘financial statements’ where appropriate (Section 2). This is a continuation of the amendments made by AASB 2007-8, which had already updated the terminology in the application paragraphs of Australian Accounting Standards.
Entities governed by these standards are required to adopt the amended terminology in their financial reporting to ensure consistency and alignment with international standards. This includes updating their accounting policies, disclosures, and other documentation to reflect the new terminology. It is crucial that these changes are implemented from the specified application date to maintain compliance with the standards. The standard allows for early adoption for periods beginning after 1 January 2005, provided that the revised AASB 101 is also adopted (Section 3).
The amendments introduced by AASB 2007-10 do not establish new obligations beyond the adoption of the specified terminology; however, failure to comply with the standard could lead to inconsistencies in financial reporting, potentially impacting the comparability and clarity of financial statements. The AASB did not prepare a Regulatory Impact Statement as the amendments were deemed minor and did not significantly impact business or competition (Section 4). The standard, therefore, does not introduce new offences or penalties. However, non-compliance could result in scrutiny or penalties under broader accounting and financial reporting regulations.