Explanatory Statement
Accounting Standard AASB 2012-7
Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements
September 2012
EXPLANATORY STATEMENT
Reasons for Issuing AASB 2012-7
AASB 2012-7 makes amendments to the following Australian Accounting Standards:
(a) AASB 7 Financial Instruments: Disclosures;
(b) AASB 12 Disclosure of Interests in Other Entities;
(c) AASB 101 Presentation of Financial Statements; and
(d) AASB 127 Separate Financial Statements;
to establish reduced disclosure requirements for entities preparing general purpose financial statements under Australian Accounting Standards – Reduced Disclosure Requirements for additional and amended disclosures arising from:
(e) AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets;
(f) AASB 12;
(g) AASB 127;
(h) AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income;
(i) AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities;
(j) AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009–2011 Cycle; and
(k) AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures.
Main Features of AASB 2012-7
AASB 2012-7 amends the Australian Accounting Standards – Reduced Disclosure Requirements for AASB 7, AASB 12, AASB 101 and AASB 127. AASB 1053 Application of Tiers of Australian Accounting Standards provides further information regarding the differential reporting framework and the two tiers of reporting requirements for preparing general purpose financial statements.
Application Date
This Standard applies to annual reporting periods beginning on or after 1 July 2013. Earlier application of the Standard, or its amendments to individual standards, is permitted for annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013 provided that AASB 1053 and the following Standards (as relevant) are also adopted for the same period:
(a) amendments to AASB 7 – AASB 2010-6, AASB 2012-2 and AASB 2012-6;
(b) amendments to AASB 12 – AASB 12;
(c) amendments to AASB 101 – AASB 2011-9 and AASB 2012‑5; and
(d) amendments to AASB 127 – AASB 127.
Consultation Prior to Issuing this Standard
The reduced disclosure requirements in the Standard result from the following Exposure Drafts:
(a) ED 207 Amendments to AASB 7: Tier 2 (issued December 2010);
(b) ED 209 Offsetting Financial Assets and Financial Liabilities (proposed amendments to AASB 7 and AASB 132, and proposal relating to Tier 2 disclosure requirements) (issued February 2011);
(c) ED 213 Improvements to IFRSs (issued July 2011);
(d) ED 216 AASB 12 Disclosure of Interests in Other Entities: Tier 2 proposals (issued August 2011);
(e) ED 217 AASB 127 Separate Financial Statements: Tier 2 proposals (issued August 2011); and
(f) ED 218 Presentation of Items of Other Comprehensive Income: Tier 2 Proposals (issued September 2011).
The submissions received on the Exposure Drafts were generally supportive of the proposals. The AASB considered the comments it received in finalising AASB 2012-7.
A Regulation Impact Statement (RIS) has not been prepared specifically in connection with the issuance of AASB 2012-7. A relevant analysis is contained in the RIS prepared in connection with the issue of AASB 1053.
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
The AASB 2012-7 Accounting Standard, enacted in 2012, addresses the need to streamline financial reporting by introducing reduced disclosure requirements for entities preparing general purpose financial statements under Australian Accounting Standards. This initiative seeks to simplify and reduce the volume of disclosures required, while still ensuring that essential information is provided to users of financial statements. The amendments to AASB 7, AASB 12, AASB 101, and AASB 127 are designed to harmonise and integrate recent changes in accounting standards, thereby enhancing the clarity and consistency of financial reporting. The AASB 2012-7 standard was developed by the Australian Accounting Standards Board (AASB), an entity established by the Australian Securities and Investments Commission (ASIC), with the policy objective of facilitating the Australian economy by providing accounting standards that are transparent, robust, and internationally competitive.
Scope and Application
AASB 2012-7 applies to entities preparing general purpose financial statements under Australian Accounting Standards, with a specific focus on those entities that adopt the Reduced Disclosure Requirements framework. This framework, detailed in AASB 1053, provides two tiers of reporting requirements, allowing entities to choose between full disclosure and reduced disclosure, depending on their circumstances. The Act affects financial instruments, interests in other entities, presentation of financial statements, and separate financial statements. The scope of the legislation extends to the Commonwealth, state, and territory jurisdictions within Australia, as it adheres to the national Australian Accounting Standards. The Act permits earlier application from annual reporting periods beginning on or after 1 July 2009, provided that certain other relevant standards are also adopted. No exclusions, exemptions, or thresholds are explicitly stated in the explanatory statement, but the reduced disclosure requirements are contingent on entities meeting the criteria set out in AASB 1053. Subordinate instruments or regulations may further define or extend the application of AASB 2012-7.
Key Provisions
AASB 2012-7 (AASB 2012-7) introduces amendments to several Australian Accounting Standards, including AASB 7 Financial Instruments: Disclosures, AASB 12 Disclosure of Interests in Other Entities, AASB 101 Presentation of Financial Statements, and AASB 127 Separate Financial Statements. The primary purpose of these amendments is to reduce the disclosure requirements for entities preparing general purpose financial statements under Australian Accounting Standards, in response to additional and amended disclosures arising from various other amendments (sections 1(e) to (k)).
The amendments establish reduced disclosure requirements for entities preparing general purpose financial statements, focusing on the disclosure of financial instruments, interests in other entities, presentation of financial statements, and separate financial statements. This is done to align with the differential reporting framework and the two tiers of reporting requirements provided by AASB 1053 Application of Tiers of Australian Accounting Standards (section 1).
AASB 2012-7 imposes obligations on entities to adopt these reduced disclosure requirements for annual reporting periods beginning on or after 1 July 2013. Earlier application is permitted for periods beginning on or after 1 July 2009 but before 1 July 2013, provided that AASB 1053 and the relevant amendments to the individual standards are also adopted for the same period (section 3).
For non-compliance with the provisions of AASB 2012-7, entities may face legal and financial consequences. Although the specific penalties are not detailed in the legislation, non-compliance with accounting standards generally may lead to enforcement actions by regulatory bodies, including financial penalties, public censure, or other legal remedies. The Australian Accounting Standards Board (AASB) and the Australian Securities and Investments Commission (ASIC) are responsible for monitoring compliance with these standards and can take action against entities that fail to comply.