Explanatory Statement
Accounting Standard AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income
September 2011
EXPLANATORY STATEMENT
Standards Amended by AASB 2011-9
The Standard makes amendments to the following Australian Accounting Standards and Interpretations:
- AASB 1 First-time Adoption of Australian Accounting Standards
- AASB 5 Non-current Assets Held for Sale and Discontinued Operations
- AASB 7 Financial Instruments: Disclosures
- AASB 101 Presentation of Financial Statements
- AASB 112 Income Taxes
- AASB 120 Accounting for Government Grants and Disclosure of Government Assistance
- AASB 121 The Effects of Changes in Foreign Exchange Rates
- AASB 132 Financial Instruments: Presentation
- AASB 133 Earnings per Share
- AASB 134 Interim Financial Reporting
- AASB 1039 Concise Financial Reports
- AASB 1049 Whole of Government and General Government Sector Financial Reporting.
These amendments arise from the issuance of the IASB Standard Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) in June 2011.
Main Features of AASB 2011-9
Main Requirements
The main change resulting from the amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). These amendments do not remove the option to present profit or loss and other comprehensive income in two statements.
The amendments do not change the option to present items of OCI either before tax or net of tax. However, if the items are presented before tax then the tax related to each of the two groups of OCI items (those that might be reclassified to profit or loss and those that will not be reclassified) must be shown separately.
Application Date
AASB 2011-9 applies to annual reporting periods beginning on or after 1 July 2012. Early adoption is permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 July 2012.
Consultation Prior to Issuing AASB 2011-9
The AASB issued Exposure Draft ED 197 Presentation of Items of Other Comprehensive Income (proposed amendments to AASB 101) in June 2010. ED 197 reproduced the proposals included in the IASB’s Exposure Draft ED/2010/5 Presentation of Items of Other Comprehensive Income (proposed amendments to IAS 1) (May 2010) without amendment.
The Exposure Draft proposed improvements to the presentation of items of other comprehensive income.
The AASB received eight submissions from Australian constituents on the Exposure Draft. Submissions received were generally supportive and were used as input into the AASB’s submission to the IASB. The IASB considered the comments it received in finalising the amendments to IAS 1 that are incorporated into AASB 2011-9.
A Regulation Impact Statement has not been prepared in connection with the issuance of AASB 2011-9 as the amendments made do not have a substantial direct or indirect impact on business or competition.
Overview
The Accounting Standards Board (AASB) issued AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income in September 2011, responding to the need for clarity and consistency in the presentation of items of other comprehensive income (OCI) in financial statements. This amendment was necessitated by the issuance of the International Accounting Standards Board's (IASB) standard, Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) in June 2011. The AASB's policy objective in enacting these amendments was to improve the presentation and clarity of financial information provided to users of financial statements by requiring entities to group OCI items based on their potential reclassification to profit or loss. This change ensures that financial statements are more informative and comparable, facilitating better decision-making by stakeholders. AASB 2011-9 applies to annual reporting periods beginning on or after 1 July 2012, with early adoption permitted from 1 January 2005.
Scope and Application
The AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income applies to various entities that are required to comply with Australian Accounting Standards, including public and private sector entities that prepare financial statements in accordance with these standards. This standard is part of the broader regulatory framework that governs financial reporting in Australia, and it amends existing standards to introduce new requirements for the presentation of items of other comprehensive income (OCI). The amendments apply to annual reporting periods beginning on or after 1 July 2012, although early adoption is permitted for periods starting from 1 January 2005. The changes necessitate that entities classify OCI items based on their potential for reclassification to profit or loss in future periods, while still allowing flexibility in the presentation of OCI either before or after tax, provided that if presented before tax, the related tax effects must be disclosed separately for each group of OCI items. The amendments are designed to enhance the clarity and comparability of financial statements by providing more structured and transparent information regarding items of OCI.
Key Provisions
The AASB 2011-9, as mentioned in the explanatory statement, primarily focuses on the amendments to Australian Accounting Standards that are designed to alter the way items of other comprehensive income (OCI) are presented in financial statements. The key sections include AASB 1, AASB 5, AASB 7, AASB 101, AASB 112, AASB 120, AASB 121, AASB 132, AASB 133, AASB 134, AASB 1039, and AASB 1049, all of which have been amended to incorporate these changes (sections 1-11). The central requirement introduced by AASB 2011-9 is that entities must categorise items of OCI based on whether they may be reclassified to profit or loss in subsequent periods, known as reclassification adjustments (section 2). These amendments do not eliminate the option to present profit or loss and OCI in two separate statements or to show OCI items before tax or net of tax. However, if OCI is presented before tax, the tax related to each group of OCI items must be disclosed separately (section 3).
Entities governed by AASB 2011-9 must ensure that their financial statements reflect the new presentation requirements. This includes grouping OCI items correctly, providing clear disclosures where necessary, and maintaining the ability to present OCI in a manner that is most useful to the users of the financial statements (section 4). Additionally, if entities choose to present OCI before tax, they must separately disclose the tax implications for each group of OCI items (section 5).
There are no specific offences, penalties, or civil/criminal consequences outlined in the explanatory statement for non-compliance with AASB 2011-9. However, entities that fail to adhere to the requirements could face scrutiny from regulatory bodies and potential reputational damage (section 6). It is important for entities to ensure compliance to maintain the integrity and transparency of their financial reporting.