Explanatory Statement
Accounting Standard AASB 2012-10
Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments
December 2012
EXPLANATORY STATEMENT
Introduction
AASB 2012‑10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments makes amendments to the Australian Accounting Standards and Interpretation listed in paragraph 1 of the Standard.
These amendments arise from the following sources:
(a) the issuance of International Financial Reporting Standard Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12) by the International Accounting Standards Board (IASB) in June 2012;
(b) the decision of the AASB in September 2012 to defer the mandatory application of AASB 10 Consolidated Financial Statements and related Standards to not-for-profit entities until annual reporting periods beginning on or after 1 January 2014;
(c) editorial corrections made by the IASB to its Standards and Interpretations (IFRSs); and
(d) editorial corrections made by the AASB to its pronouncements.
Main Features of the Standard
Main Requirements
The amendments to AASB 10 and related Standards revise the transition guidance relevant to the initial application of those Standards, to clarify the circumstances in which adjustments to an entity’s previous accounting for its involvement with other entities are required and the timing of such adjustments. These amendments result from proposals issued in AASB Exposure Draft ED 224 Transition Guidance (December 2011).
Further amendments to AASB 10 and related Standards revise their application paragraphs, so that they apply mandatorily to not-for-profit entities for annual reporting periods beginning on or after 1 January 2014, with early application permitted for not-for-profit entities only from 1 January 2013. The application of the amendments set out in AASB 2011‑7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards is similarly amended. There is no change to the application date for for-profit entities, which are required to apply those Standards for annual reporting periods beginning on or after 1 January 2013, with early application permitted.
AASB 2012-10 also makes various editorial amendments to a range of Australian Accounting Standards and to Interpretation 12 Service Concession Arrangements, including amendments to reflect changes made to the text of IFRSs by the IASB.
Application Date
The Standard applies to annual reporting periods beginning on or after 1 January 2013. Early application is permitted, subject to conditions in relation to the amendments to AASB 10 and related Standards.
Consultation Prior to Issuing the Standard
Public consultation was part of the process in developing the AASB’s submission on IASB Exposure Draft ED/2011/7 Transition Guidance, issued by the IASB for public comment. The AASB received submissions from seven Australian constituents on AASB ED 224 Transition Guidance (December 2011), which were generally supportive of the proposals. The IASB considered the comments submitted on its Exposure Draft including the AASB’s submission, before finalising amendments to its Standards. AASB 2012‑10 makes amendments to AASB 10, AASB 11 Joint Arrangements and AASB 12 Disclosure of Interests in Other Entities to reflect those amendments made by the IASB.
The AASB’s deferral of the application date of AASB 10 and related Standards acknowledges that the AASB is still developing implementation guidance to assist not-for-profit entities to apply those Standards. The implementation guidance will be finalised through a public consultation process.
No consultation was necessary in respect of the editorial corrections made by AASB 2012-10, given their non-substantive nature.
A Regulation 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.
Statement of Compatibility with Human Rights
AASB 2012‑10 is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
The Standard is issued by the AASB in furtherance of the objective of facilitating the Australian economy. It does not diminish or limit any of the applicable human rights or freedoms, and thus does not raise any human rights issues.
Overview
The Accounting Standard AASB 2012-10, issued in December 2012, amends various Australian Accounting Standards to align with recent international standards and to address specific implementation concerns for not-for-profit entities. This Standard was enacted by the Australian Accounting Standards Board (AASB) to rectify discrepancies arising from the issuance of the International Financial Reporting Standard Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance by the International Accounting Standards Board (IASB) in June 2012. Additionally, the AASB deferred the application of AASB 10 Consolidated Financial Statements and related Standards for not-for-profit entities until annual reporting periods beginning on or after 1 January 2014, recognising the need for further guidance on the application of these Standards by such entities. The amendments also include editorial corrections to various Australian Accounting Standards and Interpretations to ensure consistency with the text of IFRSs as amended by the IASB. The primary policy objective of AASB 2012-10 is to facilitate the Australian economy by ensuring that financial reporting standards are in line with international practices while providing necessary clarifications and deferrals to support effective implementation, particularly for not-for-profit entities.
Scope and Application
AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments applies to entities required to prepare financial statements in accordance with Australian Accounting Standards. It specifies the adjustments and timing for the initial application of certain accounting standards, particularly those concerning consolidated financial statements, joint arrangements, and disclosure of interests in other entities. The amendments pertain to both for-profit entities and not-for-profit entities, with a deferred application date for the latter, mandating compliance from annual reporting periods beginning on or after 1 January 2014, with early application permitted from 1 January 2013. For-profit entities must adhere to the amendments from annual reporting periods beginning on or after 1 January 2013, with the option for early application. The Standard incorporates editorial corrections and clarifications based on updates from the International Accounting Standards Board and the Australian Accounting Standards Board. Early application of the amendments is permitted subject to specific conditions outlined in the Standard. The amendments are applicable across Australia, given the AASB’s authority in setting accounting standards for the nation.
Key Provisions
The legislation, AASB 2012-10, focuses on amending Australian Accounting Standards and includes transition guidance for entities to follow when implementing new accounting standards. The primary operative sections include those that revise the transition guidance relevant to the initial application of AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, and AASB 12 Disclosure of Interests in Other Entities. These amendments clarify the circumstances and timing for adjustments in an entity's accounting due to involvement with other entities, as outlined in section 1 of AASB 2012-10. Additionally, the legislation mandates the application of these revised standards to not-for-profit entities starting from annual reporting periods beginning on or after 1 January 2014, with early application permitted from 1 January 2013, as stated in section 2. The amendments also include editorial corrections to various accounting standards to reflect changes made by the International Accounting Standards Board (IASB) and the Australian Accounting Standards Board (AASB).
Entities governed by these amendments are required to ensure that their financial reporting complies with the new transition guidance and application dates specified. For-profit entities must apply the Standards for annual reporting periods beginning on or after 1 January 2013, with early application permitted. Not-for-profit entities must adopt the Standards starting from annual reporting periods beginning on or after 1 January 2014, but they can opt for early application from 1 January 2013. The entities must also ensure that any adjustments resulting from the new guidance are properly accounted for and disclosed in their financial statements, as per the provisions detailed in section 3 of AASB 2012-10.
Failure to comply with the requirements of AASB 2012-10 could result in misstated financial reports, which may lead to regulatory scrutiny and potential legal consequences. Although the legislation does not explicitly outline specific penalties or consequences for non-compliance, entities could face scrutiny from regulatory bodies such as the Australian Securities and Investments Commission (ASIC). In severe cases, non-compliance could result in financial penalties, reputational damage, or legal actions against the entity or its officers. It is important for entities to ensure that they adhere to the new standards to avoid any adverse effects.