AASB 2013-8 - Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities - October 2013

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Explanatory Statement

 

 

Accounting Standard AASB 2013-8
Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities

October 2013

 

 

EXPLANATORY STATEMENT

Reasons for Issuing AASB 2013-8

AASB 2013-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities makes amendments to the Australian Accounting Standards AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other Entities and AASB 1049 Whole of Government and General Government Sector Financial Reporting.

Main Features of AASB 2013-8

The amendments to AASB 10 add Appendix E Australian Implementation Guidance for Not-for-Profit Entities as an integral part of that Standard.  The appendix explains various principles in AASB 10 regarding the criteria for determining whether one entity controls another entity from the perspective of not-for-profit entities, and illustrates the principles with examples.

Appendix E covers aspects of the three criteria set out in paragraph 7 of AASB 10 for control of an investee by an investor:  power over the investee, returns to the investor, and the link between power and returns.  The basic terms ‘investor’ and ‘investee’ in AASB 10 are explained in the appendix as entities that have a relationship in which control of one entity (the investee) by the other (the investor) might arise.

As this explanation of the basic terms shows, the appendix does not seek to replace or revise the terminology used in AASB 10, but to explain its application in the not-for-profit private and public sectors.  Nor does the appendix amend or deviate from the principles underlying AASB 10.

The amendment to AASB 12 adds Appendix E Australian Implementation Guidance for Not-for-Profit Entities as an integral part of that Standard.  The appendix explains the application of the AASB 12 definition of ‘structured entity’ by not-for-profit entities.

AASB 2013-8 also amends AASB 1049 to replace references to the superseded AASB 127 Consolidated and Separate Financial Statements with references to AASB 10 or AASB 12.  In addition, AASB 1049 is amended so that General Government Sector financial statements are not required to comply with the disclosure requirements of AASB 12.

Application Date

AASB 2013-8 applies to annual reporting periods beginning on or after 1 January 2014.  Early application is permitted for annual reporting periods beginning on or after 1 January 2013 but before 1 January 2014.  These dates are the same as for the application of AASB 10 and AASB 12 to not-for-profit entities, as amended by AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments.

Consultation Prior to Issuing this Standard

The AASB issued Exposure Draft ED 238 Consolidated Financial Statements – Australian Implementation Guidance for Not-for-Profit Entities for public comment in March 2013.  In the process of developing the proposals in ED 238, discussions were held with constituents experienced in not-for-profit public sector and private sector financial reporting, to ascertain implementation issues that might be encountered in applying AASB 10 in a not-for-profit context.

The AASB received thirteen submissions from Australian constituents on ED 238.  Most were generally supportive of the proposals, whilst raising various issues for consideration.  The AASB considered the comments it received in finalising AASB 2013-8.

A Regulation Impact Statement (RIS) has not been prepared specifically in connection with the issuance of AASB 2013-8 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

Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011

Accounting Standard AASB 2013-8
Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities

Overview of the Accounting Standard

AASB 2013-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities makes amendments to the Australian Accounting Standards AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other Entities and AASB 1049 Whole of Government and General Government Sector Financial Reporting.

The amendments to AASB 10 add Appendix E Australian Implementation Guidance for Not-for-Profit Entities as an integral part of that Standard.  The appendix explains various principles in AASB 10 regarding the criteria for determining whether one entity controls another entity from the perspective of not-for-profit entities, and illustrates the principles with examples.

The amendment to AASB 12 adds Appendix E Australian Implementation Guidance for Not-for-Profit Entities as an integral part of that Standard.  The appendix explains the application of the AASB 12 definition of ‘structured entity’ by not-for-profit entities.

Human Rights Implications

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.

Conclusion

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.

Overview

The Accounting Standard AASB 2013-8, titled "Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities," was enacted in 2013 by the Australian Accounting Standards Board (AASB) to address the specific needs of not-for-profit entities in applying the criteria for control and structured entities as outlined in AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other Entities, and AASB 1049 Whole of Government and General Government Sector Financial Reporting. This accounting standard was introduced to clarify and enhance the application of these principles for not-for-profit entities, ensuring that their financial reporting practices are both accurate and consistent with broader accounting standards. The AASB, established under the Australian Securities and Investments Commission Act 2001, aims to facilitate the Australian economy by ensuring high-quality financial reporting, which includes addressing specific issues pertinent to not-for-profit entities. This standard does not have any adverse implications on human rights and is fully 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.

Scope and Application

The AASB 2013-8 Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities applies to entities within the not-for-profit sector, providing specific guidance on the application of AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other Entities, and AASB 1049 Whole of Government and General Government Sector Financial Reporting. This accounting standard is designed to clarify the application of these standards for not-for-profit entities by adding Appendix E Australian Implementation Guidance for Not-for-Profit Entities, which explains the criteria for determining control and the definition of structured entities from the perspective of not-for-profit entities. This legislation applies nationally across Australia and is intended for use by entities preparing financial statements in accordance with Australian Accounting Standards. Early application is permitted for annual reporting periods beginning on or after 1 January 2013, but before 1 January 2014, with full application required for periods beginning on or after 1 January 2014. The AASB received feedback from thirteen submissions on the Exposure Draft ED 238 Consolidated Financial Statements – Australian Implementation Guidance for Not-for-Profit Entities, which informed the finalisation of AASB 2013-8. This standard does not diminish or limit any of the applicable human rights or freedoms, and thus does not raise any human rights issues.

Key Provisions

AASB 2013-8 (Amendments to Australian Accounting Standards – Australian Implementation Guidance for Not-for-Profit Entities – Control and Structured Entities) introduces significant changes to three key Australian Accounting Standards: AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other Entities, and AASB 1049 Whole of Government and General Government Sector Financial Reporting. Specifically, the amendments add Appendix E Australian Implementation Guidance for Not-for-Profit Entities to both AASB 10 and AASB 12, which provides clarification on the criteria for determining control and the application of the definition of 'structured entity' from the perspective of not-for-profit entities. Additionally, AASB 1049 is amended to update references and exempt General Government Sector financial statements from certain disclosure requirements. The obligations imposed by AASB 2013-8 are primarily on entities preparing consolidated financial statements, including not-for-profit entities. These entities must now adhere to the guidance provided in Appendix E when determining control and applying the definitions within AASB 10 and AASB 12. The amendments ensure that not-for-profit entities apply the same principles as for-profit entities but with additional context and examples tailored to their unique circumstances. Compliance with these standards is crucial for maintaining the integrity and comparability of financial reporting across sectors. Breaching the requirements set out in AASB 2013-8 could lead to significant consequences. Although specific offences and penalties are not detailed within the explanatory statement, non-compliance with Australian Accounting Standards generally can result in civil and criminal penalties. For example, misleading or deceptive financial reporting can attract penalties under the Corporations Act 2001, which includes fines of up to $1.8 million for corporations and imprisonment for individuals. Furthermore, failure to comply with these standards could undermine the credibility of an entity's financial statements, potentially leading to regulatory action, loss of investor confidence, and reputational damage.

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