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AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements - June 2010

AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements - June 2010

Administered by Department of the Treasury

Legislation au F2010L02135 Not in force Legislative Instrument

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Explanatory Statement

Accounting Standard AASB 2010-2
Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements

June 2010

EXPLANATORY STATEMENT

Reasons for Issuing AASB 2010-2

This Standard makes amendments to the following Australian Accounting Standards and Interpretations:

1. AASB 1 First-time Adoption of Australian Accounting Standards;

2. AASB 2 Share-based Payment;

3. AASB 3 Business Combinations;

4. AASB 5 Non-current Assets Held for Sale and Discontinued Operations;

5. AASB 7 Financial Instruments: Disclosures;

6. AASB 8 Operating Segments;

7. AASB 101 Presentation of Financial Statements;

8. AASB 102 Inventories;

9. AASB 107 Statement of Cash Flows;

10. AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors;

11. AASB 110 Events after the Reporting Period;

12. AASB 111 Construction Contracts;

13. AASB 112 Income Taxes;

14. AASB 116 Property, Plant and Equipment;

15. AASB 117 Leases;

16. AASB 119 Employee Benefits;

17. AASB 121 The Effects of Changes in Foreign Exchange Rates;

18. AASB 123 Borrowing Costs;

19. AASB 124 Related Party Disclosures;

20. AASB 127 Consolidated and Separate Financial Statements;

21. AASB 128 Investments in Associates;

22. AASB 131 Interests in Joint Ventures;

23. AASB 133 Earnings per Share;

24. AASB 134 Interim Financial Reporting;

25. AASB 136 Impairment of Assets;

26. AASB 137 Provisions, Contingent Liabilities and Contingent Assets;

27. AASB 138 Intangible Assets;

28. AASB 140 Investment Property;

29. AASB 141 Agriculture;

30. AASB 1050 Administered Items;

31. AASB 1052 Disaggregated Disclosures;

32. Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments;

33. Interpretation 4 Determining whether an Arrangement contains a Lease;

34. Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds;

35. Interpretation 15 Agreements for the Construction of Real Estate;

36. Interpretation 17 Distributions of Non-cash Assets to Owners;

37. Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease;

38. Interpretation 129 Service Concession Arrangements: Disclosures; and

39. Interpretation 1052 Tax Consolidation Accounting;

as a consequence of the adoption of a revised differential financial reporting framework under AASB 1053 Application of Tiers of Australian Accounting Standards.

Main Features of AASB 2010-2

This Standard sets out the disclosure requirements from which entities applying the second Tier of reporting requirements are exempt. It adds paragraphs to various Standards that state the exemptions that apply under reduced disclosure requirements. Each amended Standard also shows the relevant exemptions in shaded text. Where necessary, reduced disclosure requirements suitable for Tier 2 entities are included in the form of RDR paragraphs.

Application Date

This Standard applies for annual reporting periods beginning on or after 1 July 2013. Earlier application is permitted for annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 is also applied for the period.

Consultation Prior to Issuing this Standard

The AASB issued Invitation to Comment (ITC) 12 Request for Comment on a Proposed Revised Differential Reporting Regime for Australia and IASB Exposure Draft of A Proposed IFRS for Small and Medium-sized Entities in May 2007 with proposals for a second tier of reporting requirements based on a future IFRS for SMEs. ITC 12 also proposed that the entities that could avail themselves of a second tier of reporting requirements would be determined largely on the basis of size thresholds.

Roundtables were held in Melbourne and Sydney to seek constituents’ views on ITC 12 proposals and a total of 43 substantive written submissions were received on ITC 12. While constituents in general supported differential reporting, most constituents rejected using size thresholds to distinguish between entities falling under different Tiers on the basis that such thresholds are difficult to determine and are arbitrary in their impact.

Following consideration of the responses to ITC 12, the AASB issued a Consultation Paper titled Reducing the Burden of Financial Reporting Requirements: A Proposed Reduced Disclosure Regime for Non-publicly Accountable For-profit Private Sector Entities and Certain Entities in the Not-for-profit Private Sector and Public Sector and an Exposure Draft ED 192 Revised Differential Reporting Framework in February 2010.

ED 192 sought constituents’ views on a proposed reduced disclosure regime as a second Tier of reporting requirements preparing general purpose financial statements. It included proposed disclosure requirements under a Reduced Disclosure Regime.

Constituents views were also sought about the adoption of the International Accounting Standards Board’s IFRS for SMEs as an alternative to the Reduced Disclosure Regime. Further roundtables were held in Melbourne and Sydney to seek constituents’ views on ED 192 (and the related Consultation Paper) proposals. A total of 42 substantive submissions were received on ED 192. Constituents generally supported the creation of a second Tier of reporting requirements for preparing general purpose financial statements. A majority of respondents supported the proposed reduced disclosure regime as the second Tier.

A Regulation Impact Statement has been prepared in connection with the issue of this Standard and AASB 1053 Application of Tiers of Australian Accounting Standards that provides an analysis of costs and benefits of different Options for reducing the reporting burden of Australian entities.

Overview

Accounting Standard AASB 2010-2, enacted in June 2010, addresses the need to provide reduced disclosure requirements for certain entities under the Australian Accounting Standards framework. The Australian Accounting Standards Board (AASB) introduced this amendment to address the burden of financial reporting requirements for non-publicly accountable for-profit private sector entities and certain entities in the not-for-profit private sector and public sector. The policy objective was to create a second tier of reporting requirements that would ease the financial reporting obligations for these entities, as opposed to the full disclosure requirements under the primary tier. This amendment was made in response to consultations and submissions highlighting the difficulty and arbitrariness of size thresholds in determining which entities should be subject to reduced disclosure requirements. The AASB initially proposed a second tier of reporting requirements in May 2007 through the Invitation to Comment (ITC) 12, which was met with general support but significant criticism regarding the use of size thresholds. Following this, the AASB sought further feedback on a proposed reduced disclosure regime as an alternative to the initial proposals, which led to the issuance of AASB 2010-2. This amendment is designed to provide suitable reduced disclosure requirements for entities that would benefit from a less burdensome reporting regime, in alignment with the AASB 1053 Application of Tiers of Australian Accounting Standards.

Scope and Application

The Accounting Standard AASB 2010-2, Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements, amends existing Australian Accounting Standards and Interpretations to provide reduced disclosure requirements for entities applying the second Tier of reporting under AASB 1053 Application of Tiers of Australian Accounting Standards. This Standard is applicable to entities that adopt the reduced disclosure regime, which is primarily intended for non-publicly accountable for-profit private sector entities, certain entities in the not-for-profit private sector, and public sector entities. It applies to annual reporting periods beginning on or after 1 July 2013, with the option for earlier application for periods beginning between 1 July 2009 and 1 July 2013, provided that AASB 1053 is also applied. The Standard adds specific paragraphs to various amended Standards, highlighting the exemptions available under the reduced disclosure regime in shaded text, and includes reduced disclosure requirements in the form of RDR paragraphs where necessary. The AASB developed this Standard following extensive consultation, including feedback from roundtables and written submissions, to address the reporting burden on entities while still ensuring adequate financial transparency.

Key Provisions

AASB 2010-2 (Section 1) amends various Australian Accounting Standards and Interpretations to provide reduced disclosure requirements for entities applying the second Tier of reporting requirements under AASB 1053. This standard introduces exemptions from certain disclosure requirements for entities that qualify for the reduced disclosure regime. Each amended standard includes paragraphs that specify the exemptions in shaded text, making it clear which disclosures are exempt for these entities. Where necessary, the standard includes reduced disclosure requirements suitable for Tier 2 entities in the form of RDR paragraphs, providing a clear and structured approach to the exemptions. The application date for these amendments is for annual reporting periods beginning on or after 1 July 2013, although earlier application is permitted for periods beginning on or after 1 July 2009, provided that AASB 1053 is also applied. The obligations imposed by AASB 2010-2 on entities applying the second Tier of reporting requirements are primarily related to compliance with the reduced disclosure requirements as specified in the amended standards. Entities must ensure that they adhere to the exemptions outlined in the shaded text and any RDR paragraphs included in the standards. This involves reviewing their financial reporting practices and making necessary adjustments to comply with the reduced disclosure requirements. Additionally, entities must ensure that they meet the eligibility criteria for the second Tier of reporting requirements under AASB 1053, which typically involves meeting certain size or other relevant thresholds. Breach of the reduced disclosure requirements specified in AASB 2010-2 can lead to civil and potentially criminal consequences. While the standard itself does not specify penalties, non-compliance with Australian Accounting Standards can result in legal action for misleading or deceptive conduct under the Corporations Act 2001. This can lead to substantial fines for both individuals and corporations. Additionally, entities that fail to comply with the reduced disclosure requirements may face reputational damage and loss of investor confidence, which can have significant long-term financial implications. It is important for entities to ensure full compliance with these standards to avoid such adverse outcomes.

Area of Law: Commercial Law
Instrument: Act
Concepts: Definitions & Interpretation; Regulatory Standards; Reporting & Disclosure Obligations

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.

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