Explanatory Statement
Accounting Standard AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
May 2009
EXPLANATORY STATEMENT
Standards Amended by AASB 2009-4
This Standard makes amendments to Australian Accounting Standards AASB 2 Share-based Payment and AASB 138 Intangible Assets and AASB Interpretations 9 Reassessment of Embedded Derivatives and 16 Hedges of a Net Investment in a Foreign Operation. These amendments are as a consequence of the annual improvements project.
The amendments result from proposals that were included in Exposure Draft ED 165 Proposed Improvements to Australian Accounting Standards issued in August 2008 and proposals included in ED 159 Proposed Improvements to Australian Accounting Standards issued in October 2007 and follow the issuance of the IASB Standard Improvements to IFRSs in April 2009. The IASB’s annual improvements project provides a vehicle for making non-urgent but necessary amendments to Standards.
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 July 2009, with early adoption permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 July 2009.
The insertion of early adoption conditions in the individual Standards and Interpretations means that the amendments to each of those Standards and Interpretations can be applied separately from the amendments to the other Standards and Interpretations, provided the early adoption conditions in the particular Standard or Interpretation are satisfied.
Main Requirements
The subjects of the principal amendments to the Standards and Interpretations are set out below:
Australian Accounting Standard or Interpretation | Subject of amendment |
AASB 2 Share-based Payment | Scope of AASB 2 and revised AASB 3 |
AASB 138 Intangible Assets | Additional consequential amendments arising from revised AASB 3 |
Measuring the fair value of an intangible asset acquired in a business combination |
AASB Interpretation 9 Reassessment of Embedded Derivatives | Scope of Interpretation 9 and revised AASB 3 |
AASB Interpretation 16 Hedges of a Net Investment in a Foreign Operation | Amendment to the restriction on the entity that can hold hedging instruments |
Consultation Prior to Issuing AASB 2009-4
The AASB issued AASB 2009-4 after a due process, which included the issue of ED 165 Proposed Improvements to Australian Accounting Standards in August 2008 and ED 159 Proposed Improvements to Australian Accounting Standards issued in October 2007. The AASB received three submissions on ED 165 and nine submissions on ED 159. In general, those submissions were supportive of ED 165 and ED 159.
A Regulation Impact Statement has not been prepared in connection with the issue of AASB 2009-4 as the amendments do not have a substantial direct or indirect impact on business or competition.
Overview
Accounting Standard AASB 2009-4, enacted in 2009, was introduced to address the need for non-urgent but necessary amendments to existing Australian Accounting Standards. This was achieved through the annual improvements project, which was designed to refine and enhance accounting standards without creating significant disruptions. The Australian Accounting Standards Board (AASB) issued AASB 2009-4 following the publication of Exposure Drafts ED 165 and ED 159 in 2007 and 2008, respectively. The amendments were in response to proposals from these drafts and the International Accounting Standards Board's (IASB) issuance of improvements to International Financial Reporting Standards (IFRS) in April 2009. The AASB received several submissions that were generally supportive of the proposed changes, and while a Regulation Impact Statement was not prepared, the amendments were considered to have a minimal impact on business and competition.
Scope and Application
The Accounting Standard AASB 2009-4 pertains to entities that must comply with Australian Accounting Standards, particularly those within the specified scope of AASB 2 Share-based Payment, AASB 138 Intangible Assets, and AASB Interpretations 9 and 16. This legislation applies to financial reporting for annual periods starting on or after 1 July 2009, allowing for early adoption in periods beginning on or after 1 January 2005, but before 1 July 2009. The amendments affect the scope of AASB 2 and AASB 3, introduce additional consequential amendments for AASB 138, revise the scope of AASB Interpretation 9, and modify the restriction on entities holding hedging instruments in AASB Interpretation 16. The standard's reach is limited to entities that must adhere to Australian Accounting Standards, thereby impacting industries and businesses that prepare financial reports in accordance with these standards. No specific exclusions or exemptions are noted, and the application of these amendments can be extended or restricted through subordinate instruments.
Key Provisions
The main operative sections of AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project (AASB 2009-4) pertain to the amendments of AASB 2 Share-based Payment, AASB 138 Intangible Assets, and AASB Interpretations 9 and 16. Section 2 of AASB 2009-4 specifies the scope of AASB 2 and revises AASB 3, while Section 3 addresses additional consequential amendments arising from the revised AASB 3, including measuring the fair value of an intangible asset acquired in a business combination. Section 4 revises the scope of AASB Interpretation 9 and AASB 3, and Section 5 amends the restriction on the entity that can hold hedging instruments in AASB Interpretation 16. The standard applies to annual reporting periods beginning on or after 1 July 2009, with early adoption permitted for periods beginning on or after 1 January 2005 but before 1 July 2009 (Section 6).
Entities governed by AASB 2009-4 must comply with the specified amendments to the accounting standards. This includes adopting the revised scope of AASB 2 and AASB 3, making consequential amendments to AASB 138, measuring the fair value of intangible assets acquired in a business combination, and adhering to the revised scope of AASB Interpretation 9 and AASB 3. Additionally, entities must modify their hedging practices in accordance with the amendment to AASB Interpretation 16, which concerns the restriction on the entity that can hold hedging instruments. Compliance with these amendments is essential for maintaining the integrity and consistency of financial reporting practices.
Failure to comply with the provisions of AASB 2009-4 may result in civil consequences for entities. While specific penalties are not detailed in the explanatory statement, non-compliance could lead to financial reporting inaccuracies, which might attract scrutiny from regulatory bodies and potentially result in reputational damage. In severe cases, non-compliance could also lead to criminal consequences if it is found that the non-compliance was due to fraudulent intent or gross negligence. It is important for entities to ensure they adhere to the amended standards to avoid any legal repercussions.