Explanatory Statement
Accounting Standard AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101
September 2007
EXPLANATORY STATEMENT
Reasons for Issuing AASB 2007-8
Australian Accounting Standards that apply to annual reporting periods beginning on or after 1 January 2005 include International Financial Reporting Standards (IFRSs). IFRSs are issued by the International Accounting Standards Board (IASB). Their adoption in Australia by the Australian Accounting Standards Board (AASB) is in accordance with a strategic direction made by the Financial Reporting Council (FRC).
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 is using 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.
This Standard, AASB 2007-8, amends Australian Accounting Standards (including Interpretations). 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 2007-8
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 AASB 101 issued in October 2007 is also adopted for the same period.
Main Requirements
The revision of AASB 101 necessitates consequential amendments to Australian Accounting Standards (including Interpretations).
This Amending Standard also changes the term ‘general purpose financial report’ to ‘general purpose financial statements’ and the term ‘financial report’ to ‘financial statements’ in application paragraphs, where relevant, of Australian Accounting Standards (including Interpretations) to better align with IFRS terminology.
Consultation Prior to Issuing AASB 2007-8
The AASB issued Exposure Draft ED 148 Proposed Amendments to AASB 101 Presentation of Financial Statements: A Revised Presentation, the Australian equivalent to the IASB Exposure Draft of Proposed Amendments to IAS 1 Presentation of Financial Statements: A Revised Presentation, in April 2006. The AASB’s ED 148:
(a) reproduced the IASB proposals without amendment and sought constituents’ views on the IASB’s proposed amendments; and
(b) identified differences between AASB 101 and IAS 1 and provided the AASB’s then preliminary views on each difference and sought constituents’ comments on those views.
One hundred and seventy-seven submissions were received in respect of the proposals in the ED and although there was support for adopting an Australian equivalent to the proposed revised IAS 1, there was concern about the proposed changes to commentary supporting the IASB’s definition of general purpose financial statements. The commentary supporting the IASB’s definition of general purpose financial statements has not been included in the revised versions of IAS 1 and AASB 101.
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 2007-8, enacted in 2007, addresses the need for amending Australian Accounting Standards arising from the issuance of the revised AASB 101 Presentation of Financial Statements. This Standard, issued by the Australian Accounting Standards Board (AASB), is a response to the adoption of International Financial Reporting Standards (IFRSs) by the AASB, aligning with the strategic direction set by the Financial Reporting Council (FRC). The primary policy objective of AASB 2007-8 is to ensure that Australian Accounting Standards are consistent with the revised IAS 1 Presentation of Financial Statements issued by the International Accounting Standards Board (IASB), thereby facilitating a uniform approach to financial reporting across sectors and promoting clarity and coherence in financial statements terminology. The Standard is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for periods starting from 1 January 2005, provided that AASB 101 issued in October 2007 is also adopted.
Scope and Application
AASB 2007-8 is an amending standard that applies 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 AASB 101 issued in October 2007 is also adopted for the same period. This standard is applicable to both for-profit and not-for-profit entities, including public sector entities, and aligns Australian accounting standards with International Financial Reporting Standards (IFRSs). The primary purpose of AASB 2007-8 is to make consequential amendments to Australian Accounting Standards and Interpretations due to the issuance of a revised AASB 101, which was aligned with the revised IAS 1 issued by the International Accounting Standards Board (IASB). Additionally, this standard updates terminology within Australian accounting standards to match IFRS terminology, changing terms such as ‘general purpose financial report’ to ‘general purpose financial statements’. The AASB issued Exposure Draft ED 148 in April 2006 to seek feedback on the proposed amendments, resulting in 177 submissions, some of which expressed concerns about the proposed changes to the commentary supporting the IASB’s definition of general purpose financial statements.
Key Provisions
AASB 2007-8, which amends Australian Accounting Standards, applies to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for periods beginning on or after 1 January 2005 (Section 2). This amendment arises from the revision of AASB 101, the Australian equivalent of IAS 1, which has been updated to reflect the International Accounting Standards Board's (IASB) revised IAS 1 Presentation of Financial Statements. The primary requirement of this Standard is to make consequential amendments to Australian Accounting Standards (including Interpretations) to align with the revised AASB 101 (Section 3). Additionally, it updates terminology within the Standards, changing references from 'general purpose financial report' to 'general purpose financial statements' and 'financial report' to 'financial statements' to better align with International Financial Reporting Standards (IFRS) terminology (Section 4).
Entities subject to AASB 2007-8 must ensure that their financial reporting practices comply with the amendments outlined in the Standard. This includes updating their financial reporting frameworks to reflect the changes in terminology and any consequential adjustments required by the revised AASB 101. For instance, entities must ensure that their financial statements are presented in accordance with the updated definitions and requirements, particularly those related to the presentation of financial statements (Section 5). The Australian Accounting Standards Board (AASB) has indicated that early adoption is permissible, provided that the entities also adopt AASB 101 issued in October 2007 for the same reporting period (Section 2).
There are no specific offences, penalties, or civil/criminal consequences outlined in AASB 2007-8 for non-compliance with the amendments. However, non-compliance could result in financial statements that do not comply with the required accounting standards, potentially leading to regulatory scrutiny or the need for restatements. The AASB has indicated that the amendments do not have a substantial direct or indirect impact on business or competition, are of a minor or machinery nature, or clarify existing requirements, hence no Regulatory Impact Statement was prepared (Section 6). Entities should ensure that their financial reporting practices are updated in line with the requirements of AASB 2007-8 to avoid any discrepancies or non-compliance issues.