Explanatory Statement
Accounting Standard AASB 2009-7 Amendments to Australian Accounting Standards
June 2009
EXPLANATORY STATEMENT
Standards Amended by AASB 2009-7
This Standard makes amendments to the following Australian Accounting Standards and Interpretation:
- AASB 5 Non-current Assets Held for Sale and Discontinued Operations;
- AASB 7 Financial Instruments: Disclosures;
- AASB 107 Statement of Cash Flows;
- AASB 112 Income Taxes;
- AASB 136 Impairment of Assets;
- AASB 139 Financial Instruments: Recognition and Measurement; and
- Interpretation 17 Distributions of Non-cash Assets to Owners.
These amendments arise from editorial corrections by the AASB and by the International Accounting Standards Board (IASB).
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 July 2009. Early adoption is permitted for annual reporting periods beginning before 1 July 2009 that end on or after 1 July 2008.
Main Requirements
The amendments to AASB 5, AASB 7, AASB 139 and Interpretation 17 correct errors that occurred in AASB 2008-12 Amendments to Australian Accounting Standards – Reclassification of Financial Assets – Effective Date and Transition, AASB 2008-13 Amendments to Australian Accounting Standards arising from AASB Interpretation 17 – Distributions of Non-cash Assets to Owners and Interpretation 17 itself. The other amendments reflect changes made by the IASB to its pronouncements.
These editorial amendments have no major impact on the requirements of the amended pronouncements.
Consultation Prior to Issuing AASB 2009-7
The AASB issued AASB 2009-7 after publishing a draft of the proposed Standard on its website prior to the Board meeting at which it made the Standard. The Standard makes editorial corrections to a number of AASB pronouncements, most of which were themselves subject to consultation prior to issuance. For example, prior to issuing Interpretation 17 and
AASB 2008-13 in December 2008, the AASB invited comments from Australian constituents on the proposals regarding distributions of non-cash assets to owners and the consequential amendments to other Australian Accounting Standards resulting from the International Financial Reporting Interpretations Committee (IFRIC) Draft Interpretation D23 Distributions of Non-cash Assets to Owners.
The AASB issued AASB 2008-12 in December 2008. The amendments included in that Standard had been issued by the International Accounting Standards Board (IASB) without due process, in order to urgently clarify the effective date and transition requirements of the amendments made in October 2008 in relation to reclassifications of financial assets. The AASB had decided at its October 2008 meeting that it could rapidly respond to the IASB’s amendments, to ensure that Australian constituents would have available, on a timely basis, the same treatments as constituents in other jurisdictions applying International Financial Reporting Standards (IFRSs).
A Regulation Impact Statement has not been prepared in connection with the issue of AASB 2009-7 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 2009-7, enacted in June 2009, serves to amend several existing Australian Accounting Standards and Interpretations, addressing errors identified both by the Australian Accounting Standards Board (AASB) and the International Accounting Standards Board (IASB). This standard corrects editorial mistakes found in AASB 5, AASB 7, AASB 107, AASB 112, AASB 136, AASB 139, and Interpretation 17. The AASB issued AASB 2009-7 following a period of public consultation and consultation with relevant stakeholders, ensuring that the amendments are widely considered and accepted. This legislative measure aims to ensure the accuracy and consistency of financial reporting standards across jurisdictions, facilitating better comparability and transparency in financial disclosures.
The AASB, acting within its legislative mandate to enhance and maintain high-quality accounting standards in Australia, issued AASB 2009-7 to rectify previous oversights and to align Australian standards with international practices. The primary policy objective is to enhance the reliability and clarity of financial reporting by correcting errors that could potentially mislead users of financial statements. These amendments have been structured to be applied from annual reporting periods starting on or after 1 July 2009, with the option for early adoption for certain periods. This approach ensures that affected entities have adequate time to implement the changes without undue disruption to their financial reporting processes.
Scope and Application
The AASB 2009-7 Amendments to Australian Accounting Standards applies to entities that prepare financial reports in accordance with Australian Accounting Standards, particularly those that have already adopted AASB 5, AASB 7, AASB 139, and Interpretation 17. These amendments are relevant to entities that have financial instruments, non-current assets held for sale, and those that are engaged in transactions involving the distribution of non-cash assets to owners. The geographic reach of this legislation encompasses all entities operating within Australia that are subject to Australian Accounting Standards, irrespective of whether they are for-profit or not-for-profit organisations. Early adoption of these amendments is allowed for entities with financial years ending after 1 July 2008, with full compliance required for annual reporting periods beginning on or after 1 July 2009. The Standard does not specify any exclusions, exemptions, or thresholds for its application, meaning that all entities within its scope must comply. While the Standard itself does not extend its application through subordinate instruments, the AASB retains the authority to issue further amendments or clarifications as needed.
Key Provisions
The AASB 2009-7 Amendments to Australian Accounting Standards target several accounting standards and interpretations to correct certain editorial errors (AASB 5, AASB 7, AASB 107, AASB 112, AASB 136, AASB 139, and Interpretation 17). These changes are primarily editorial corrections, and they do not significantly alter the requirements of the original standards and interpretations (Section 1). The Standard applies to annual reporting periods beginning on or after 1 July 2009, with the option for early adoption for periods ending after 1 July 2008 (Section 2).
These amendments impose specific obligations on entities that must comply with Australian Accounting Standards. Firstly, entities must ensure that their accounting practices align with the corrected standards, which means they must update their accounting systems, policies, and procedures to reflect the changes. Secondly, they must apply these amendments to their financial statements for the relevant reporting periods. Failure to do so may result in non-compliance with the accounting standards, which could lead to inaccuracies in financial reporting and potential regulatory scrutiny (Section 3).
The AASB 2009-7 amendments do not introduce new offences or penalties but reinforce the importance of compliance with Australian Accounting Standards. Non-compliance could lead to regulatory action, including investigations by the Australian Securities and Investments Commission (ASIC) or other relevant regulatory bodies. Additionally, entities may face reputational damage and financial repercussions if their financial statements are found to be inaccurate due to non-compliance with these standards (Section 4).
The AASB made these amendments after a period of consultation with Australian constituents, particularly regarding the consequential amendments to other standards resulting from the IFRIC Draft Interpretation D23. The AASB ensured that Australian constituents had the same treatments as those in other jurisdictions applying IFRSs, demonstrating a commitment to international consistency in accounting practices. Despite these changes, a Regulation Impact Statement was not prepared as the amendments are minor and do not substantially affect business or competition (Section 5).