Explanatory Statement
Accounting Standard AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
June 2010
EXPLANATORY STATEMENT
Reasons for Issuing AASB 2010-4
AASB 2010-4 makes amendments to the following Australian Accounting Standards:
- AASB 1 First-time Adoption of Australian Accounting Standards
- AASB 7 Financial Instruments: Disclosures
- AASB 101 Presentation of Financial Statements
- AASB 134 Interim Financial Reporting
- Interpretation 13 Customer Loyalty Programmes.
These amendments are a consequence of the annual improvements project.
These amendments result from proposals that were included in Exposure Draft ED 188 Improvements to IFRSs published in September 2009 and in ED 185 Rate-regulated Activities published in July 2009, and follow the issuance of the IASB Standard Improvements to IFRSs in May 2010. The amendment resulting from ED 185 only provides an exemption in AASB 1 for first-time adopters with operations subject to rate regulation.
Main Features of AASB 2010-4
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 January 2011, with early adoption permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2011.
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 1 First-time Adoption of Australian Accounting Standards | Accounting policy changes in the year of adoption |
Revaluation basis as deemed cost |
Use of deemed cost for operations subject to rate regulation |
AASB 7 Financial Instruments: Disclosures | Clarification of disclosures |
AASB 101 Presentation of Financial Statements | Clarification of statement of changes in equity |
AASB 134 Interim Financial Reporting | Significant events and transactions |
Interpretation 13 Customer Loyalty Programmes | Fair value of award credits |
Consultation Prior to Issuing AASB 2010-4
The AASB issued:
(a) Exposure Draft ED 188 Improvements to IFRSs, the Australian equivalent to the IASB Exposure Draft ED/2009/11 Improvements to IFRSs, in September 2009; and
(b) Exposure Draft ED 185 Rate-regulated Activities, the Australian equivalent to the IASB Exposure Draft ED/2009/8 Rate-regulated Activities, in July 2009.
One submission was received in respect of the proposals in ED 188 and there was support for adopting the proposed IASB revision in Australian Accounting Standards. Five submissions were received in respect of the proposals in ED 185 and constituents expressed some concerns in adopting the proposals in Australia. However, the amendment resulting from ED 185 only provides an exemption in AASB 1 for first-time adopters with operations subject to rate regulation. The proposals in ED 185 which constituents were concerned have not been progressed.
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
Accounting Standard AASB 2010-4, enacted in June 2010, addresses the need for ongoing refinements and clarifications to Australian Accounting Standards as part of the annual improvements project. This initiative aims to enhance the clarity, consistency, and comparability of financial reporting by making minor but significant amendments to selected standards and interpretations. The Australian Accounting Standards Board (AASB), as the enacting body, sought to streamline and update the standards to reflect changes in the global financial reporting environment while ensuring minimal disruption to businesses. The policy objective behind AASB 2010-4 is to maintain the relevance and reliability of financial statements by incorporating improvements that have been identified through regular reviews and consultations with stakeholders. These amendments, which stem from proposals in Exposure Drafts ED 188 and ED 185, focus on providing clarity and exemptions where necessary, particularly for first-time adopters in rate-regulated sectors, thereby facilitating smoother adoption of Australian Accounting Standards.
Scope and Application
AASB 2010-4 pertains to entities that prepare financial statements in compliance with Australian Accounting Standards, encompassing both private and public sector entities, including those subject to rate regulation. The application of these amendments is mandatory for annual reporting periods beginning on or after 1 January 2011, with the provision for early adoption for periods starting between 1 January 2005 and 31 December 2010. The amendments address various aspects of financial reporting, including the first-time adoption of accounting standards, disclosures on financial instruments, presentation of financial statements, interim financial reporting, and customer loyalty programs. The amendments do not substantially impact business or competition and are primarily of a clarifying nature, reflecting changes proposed by the International Accounting Standards Board and tailored for the Australian context. No specific exclusions or exemptions are outlined beyond the noted exemption for first-time adopters with rate-regulated operations, and the application is not extended or restricted through subordinate instruments.
Key Provisions
The AASB 2010-4 (AASB 2010-4) introduces a series of amendments to several Australian Accounting Standards and Interpretations, which are derived from the annual improvements project. The primary standards affected include AASB 1 First-time Adoption of Australian Accounting Standards, AASB 7 Financial Instruments: Disclosures, AASB 101 Presentation of Financial Statements, AASB 134 Interim Financial Reporting, and Interpretation 13 Customer Loyalty Programmes. These amendments aim to refine and clarify existing accounting standards, ensuring they align with the International Financial Reporting Standards (IFRS) and address specific areas such as accounting policy changes, disclosure requirements, and revaluation of assets. The effective date for these amendments is set for annual reporting periods beginning on or after 1 January 2011, with the option for early adoption from 1 January 2005.
The AASB 2010-4 imposes several obligations on entities subject to its provisions. For example, entities must ensure that accounting policy changes in the year of adoption are properly disclosed, as outlined in AASB 1. Similarly, entities must clarify the revaluation basis as deemed cost for assets, particularly for operations subject to rate regulation. Furthermore, entities are required to provide enhanced disclosures regarding financial instruments in accordance with AASB 7, clarify the statement of changes in equity as per AASB 101, and report significant events and transactions in interim financial reports under AASB 134. Interpretation 13 mandates that the fair value of award credits in customer loyalty programmes be accurately measured and disclosed.
Violating the provisions of AASB 2010-4 may lead to significant consequences for the entities involved. While the AASB 2010-4 itself does not explicitly outline specific offences or penalties, non-compliance with the Australian Accounting Standards generally can result in civil or criminal liabilities under various legislative frameworks. For example, the Corporations Act 2001 may impose penalties for providing misleading or deceptive financial reports. The penalties can include fines and, in severe cases, imprisonment for directors or officers of the company. Additionally, non-compliance may lead to reputational damage, loss of investor confidence, and potential legal actions from stakeholders. Therefore, adherence to AASB 2010-4 is crucial to avoid these repercussions and ensure compliance with financial reporting obligations.