Explanatory Statement
Accounting Standard AASB 2009-9 Amendments to Australian Accounting Standards – Additional Exemptions for First-time Adopters
September 2009
EXPLANATORY STATEMENT
Standard Amended by AASB 2009-9
This Standard makes amendments to Australian Accounting Standard AASB 1 First-time Adoption of Australian Accounting Standards.
These amendments arise from the issuance of Additional Exemptions for First-time Adopters (Amendments to IFRS 1) by the International Accounting Standards Board in July 2009.
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 January 2010. Early adoption is permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2010.
Main Requirements
The amendments address the retrospective application of Australian Accounting Standards to ensure that entities applying Australian Accounting Standards for the first time will not face undue cost or effort in the transition process in particular situations.
The amendments:
(a) specify requirements for entities using the full cost method in place of retrospective application of Australian Accounting Standards for oil and gas assets; and
(b) exempt entities with existing leasing contracts from reassessing the classification of those contracts in accordance with Interpretation 4 Determining whether an Arrangement contains a Lease when the application of their previous accounting policies would have given the same outcome.
Consultation Prior to Issuing AASB 2009-9
The AASB issued Exposure Draft ED 168 Additional Exemptions for First-time Adopters: Proposed amendments to AASB 1 in October 2008. ED 168 reproduced the proposals included in the IASB’s Exposure Draft Additional Exemptions for First-time Adopters (Proposed amendments to IFRS 1) (September 2008) without amendment.
The AASB received two submissions from Australian constituents on ED 168. Submissions received were generally supportive. However, in its submission to the IASB, the AASB expressed particular concerns over the proposal to provide relief in respect of operations subject to rate regulation. Those proposals were not included in the final IASB Standard.
A Regulation Impact Statement has not been prepared in connection with the issue of AASB 2009-9 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 2009-9 Amendments to Australian Accounting Standards – Additional Exemptions for First-time Adopters was enacted in 2009. This legislation was developed to address the issue of providing additional exemptions for entities that are adopting Australian Accounting Standards for the first time, aiming to ease the transition process by reducing undue costs and efforts. The standard was issued by the Australian Accounting Standards Board (AASB) in response to the International Accounting Standards Board's (IASB) issuance of Additional Exemptions for First-time Adopters (Amendments to IFRS 1) in July 2009. The primary policy objective of AASB 2009-9 is to ensure that first-time adopters of Australian Accounting Standards do not face excessive burdens during the transition, thereby facilitating smoother compliance with the new standards. The amendments focus on specific areas such as the retrospective application of standards for oil and gas assets and the reassessment of leasing contracts.
Scope and Application
The AASB 2009-9 Amendments to Australian Accounting Standards – Additional Exemptions for First-time Adopters applies to entities that are adopting Australian Accounting Standards for the first time. It aims to ease the transition for these entities by providing additional exemptions from certain accounting requirements, thereby reducing the cost and effort involved in the transition process. The amendments are effective for annual reporting periods beginning on or after 1 January 2010, with early adoption permitted for periods beginning on or after 1 January 2005. Specifically, the amendments introduce a requirement for entities using the full cost method for oil and gas assets and exempt entities with existing leasing contracts from reassessing their classification if their previous accounting policies would have led to the same outcome. This legislation does not specify exclusions or exemptions beyond those outlined, nor does it address the geographic or jurisdictional reach beyond the application to entities within Australia that are adopting Australian Accounting Standards. The application of the amendments is not extended or restricted through subordinate instruments, and any further clarification or application details would be found within the accounting standards themselves.
Key Provisions
The primary operative sections of AASB 2009-9 Amendments to Australian Accounting Standards – Additional Exemptions for First-time Adopters (section 2) address the application of Australian Accounting Standards (AAS) to entities adopting these standards for the first time. Specifically, the amendments were designed to alleviate the undue cost or effort in the transition process for such entities, particularly concerning oil and gas assets and leasing contracts (section 3(a) and (b)). For entities using the full cost method, the amendments provide specific requirements to be applied in place of the retrospective application of AAS for oil and gas assets. Additionally, entities with existing leasing contracts are exempt from reassessing the classification of those contracts under Interpretation 4, provided their previous accounting policies would have yielded the same outcome.
Entities governed by this Act must adhere to the specified requirements when applying AAS for the first time, particularly those using the full cost method for oil and gas assets or those with existing leasing contracts. These entities are required to follow the detailed guidelines provided by the amendments to ensure compliance with the AAS without facing undue cost or effort. The amendments are applicable to annual reporting periods beginning on or after 1 January 2010, although early adoption is permitted for periods beginning on or after 1 January 2005 (section 4).
Failure to comply with the provisions of AASB 2009-9 may result in financial misstatements or non-compliance with AAS, which could lead to various civil and criminal consequences. However, the explanatory statement does not explicitly detail the specific offences or penalties for breach. It is implied that any such breaches would be subject to the general provisions of Australian accounting and financial reporting laws, which may include penalties for misleading or deceptive conduct, breaches of accounting standards, or other related offences. These penalties can range from fines to imprisonment, depending on the severity and intent of the breach.