Explanatory Statement
Accounting Standard AASB 2012-5
Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle
June 2012
EXPLANATORY STATEMENT
Introduction
This Standard makes amendments to the following Australian Accounting Standards and Interpretation:
- AASB 1 First-time Adoption of Australian Accounting Standards;
- AASB 101 Presentation of Financial Statements;
- AASB 116 Property, Plant and Equipment;
- AASB 132 Financial Instruments: Presentation;
- AASB 134 Interim Financial Reporting; and
- Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments.
These amendments are a consequence of the annual improvements process, which provides a vehicle for making non-urgent but necessary amendments to Standards.
These amendments result from proposals that were included in Exposure Draft ED 213 Improvements to IFRSs published in July 2011 and follow the issuance of Annual Improvements to IFRSs 2009–2011 Cycle issued by the International Accounting Standards Board in May 2012.
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 January 2013. Earlier application is permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2013.
The insertion of early application conditions in the individual Standards and Interpretation means that the amendments (or sets of amendments) to each of those Standards and Interpretation can be applied separately.
Main Requirements
The subjects of the principal amendments to the Standards and Interpretation are set out below:
Australian Accounting Standard or Interpretation | Subject of amendment |
AASB 1 First-time Adoption of Australian Accounting Standards | Repeated application of AASB 1 |
Borrowing costs |
AASB 101 Presentation of Financial Statements | Clarification of the requirements for comparative information |
AASB 116 Property, Plant and Equipment | Classification of servicing equipment |
AASB 132 Financial Instruments: Presentation; and
Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments | Tax effect of distribution to holders of equity instruments |
AASB 134 Interim Financial Reporting | Interim financial reporting and segment information for total assets and liabilities |
Consultation Prior to Issuing this Standard
The AASB issued Exposure Draft ED 213 Improvements to IFRSs, which incorporated the IASB Exposure Draft ED/2009/2 Improvements to IFRSs 2011, in July 2011.
Three submissions were received by the AASB in respect of the proposals in ED 213 and there was general support for adopting the proposed IASB revisions in Australian Accounting Standards.
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.
Statement of Compatibility with Human Rights
This Standard 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.
This 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
Accounting Standard AASB 2012-5, enacted in 2012, was introduced to address the need for ongoing refinement and improvement of Australian Accounting Standards. This Standard, issued by the Australian Accounting Standards Board (AASB), responds to proposals from the International Accounting Standards Board (IASB) aimed at making necessary but non-urgent amendments to various Australian Accounting Standards and Interpretations. The primary objective of AASB 2012-5 is to ensure that Australian standards remain aligned with international financial reporting standards while also providing clarity and consistency in financial reporting practices. The Standard applies to annual reporting periods beginning on or after 1 January 2013, with earlier application permitted under certain conditions.
Scope and Application
The F2012L01587 Accounting Standard, AASB 2012-5, pertains to amendments to various Australian Accounting Standards and Interpretations resulting from the annual improvements process for the 2009–2011 cycle. This Standard applies to entities that prepare financial reports in accordance with Australian Accounting Standards and Interpretations, specifically those that will commence annual reporting periods on or after 1 January 2013. The amendments address several key areas, including the repeated application of AASB 1 for first-time adopters, the classification of servicing equipment under AASB 116, and the presentation of tax effects of distributions to equity holders in AASB 132 and Interpretation 2. The Standard permits earlier application for periods beginning on or after 1 January 2005, but before 1 January 2013, and allows individual amendments to be applied separately due to the conditions set out in the respective Standards and Interpretations. The amendments aim to refine and clarify existing requirements, ensuring consistency and accuracy in financial reporting practices.
Key Provisions
The main sections of the legislation F2012L01587 pertain to the amendments to several Australian Accounting Standards and Interpretations, including AASB 1, AASB 101, AASB 116, AASB 132, AASB 134, and Interpretation 2. These amendments, outlined in section (4), arise from the annual improvements process aimed at making necessary but non-urgent changes to accounting standards. The primary subjects of these amendments include the repeated application of AASB 1, clarification of borrowing costs, presentation of financial statements, classification of servicing equipment, tax effects on equity distributions, and interim financial reporting. This standard applies to annual reporting periods starting on or after 1 January 2013, with earlier application permitted for periods beginning on or after 1 January 2005 but before 1 January 2013. The early application conditions allow for separate application of the amendments to each of the affected standards and interpretations.
The obligations and requirements imposed by this legislation mandate that entities comply with the amended provisions of the relevant accounting standards. For instance, entities must ensure that the repeated application of AASB 1 is correctly implemented, and they need to clarify borrowing costs in accordance with the amendments. Additionally, entities must present comparative information as required by AASB 101, classify servicing equipment as outlined in AASB 116, account for the tax effects of distributions to equity instrument holders as specified in AASB 132, and provide interim financial reporting and segment information as per AASB 134. These requirements aim to enhance the accuracy and consistency of financial reporting.
The legislation does not explicitly outline specific offences, penalties, or civil/criminal consequences for non-compliance. However, entities that fail to comply with the amended accounting standards may face scrutiny during audits and may be required to adjust their financial statements to conform with the new requirements. Such non-compliance could potentially lead to financial restatements and reputational damage. While the legislation itself does not state maximum penalties, entities may still face legal and financial repercussions under broader accounting and corporate laws if they do not adhere to the amended standards.