Explanatory Statement
Accounting Standard AASB 2015-3
Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality
January 2015
EXPLANATORY STATEMENT
Reasons for Issuing AASB 2015-3
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality effects the withdrawal of AASB 1031 Materiality by amending AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to supersede AASB 1031, and deletes references to AASB 1031 in the Australian Accounting Standards listed in the Appendix to AASB 2015-3.
Main Features of AASB 2015-3 and Application Dates
Main Requirements
As noted in the Preface to AASB 1031 Materiality (July 2004), at the time AASB 1031 was issued, the Framework for the Preparation and Presentation of Financial Statements contained limited guidance on materiality in comparison to AASB 1031. Accordingly, as part of the AASB’s initial implementation of the Financial Reporting Council’s policy of adopting the Standards of the IASB for application to reporting periods beginning on or after 1 January 2005, the AASB decided to retain AASB 1031, in a revised format, to ensure that the meaning of materiality remained well explained.
The AASB has a policy of not providing unnecessary local guidance on matters covered by IFRSs. As a consequence, the AASB decided to withdraw AASB 1031 – as was proposed in AASB Exposure Draft ED 243 Withdrawal of AASB 1031 Materiality (June 2013). Accordingly, in December 2013 the AASB re-issued AASB 1031 as an interim Standard that cross-references to other pronouncements that contain guidance on materiality. AASB 2013‑9 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments and AASB 2014-1 Amendments to Australian Accounting Standards deleted certain references to AASB 1031 in a range of other Standards, as listed in those Standards.
AASB 2015-3 completes the withdrawal of references to AASB 1031 in all Australian Accounting Standards and Interpretations, allowing that Standard to effectively be withdrawn.
Application Date
AASB 2015-3 is applicable to annual reporting periods beginning on or after 1 July 2015. Earlier application is permitted for annual reporting periods beginning on or after 1 January 2014 but before 1 July 2015.
Consultation Prior to Issuing this Standard
The AASB issued Exposure Draft ED 243 Withdrawal of AASB 1031 Materiality in June 2013.
Eight submissions were received by the AASB in respect of the proposals in ED 243 and there was general support for the proposal to withdraw AASB 1031. The AASB considered comments made in the submissions regarding the withdrawal of AASB 1031.
A RIS has not been prepared specifically in connection with the issuance of AASB 2015-3 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 2015-3
Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality
Overview of the Accounting Standard
AASB 2015-3 effects the withdrawal of AASB 1031 Materiality by amending AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to supersede AASB 1031, makes consequential amendments to AASB 108 and deletes references to AASB 1031 in particular Australian Accounting Standards listed in the Appendix to AASB 2015-3.
The AASB has a policy of not providing unnecessary local guidance on matters covered by International Financial Reporting Standards (IFRSs). As a consequence, the AASB has decided to withdraw AASB 1031. The withdrawal of AASB 1031 requires consequential amendments to all Australian Accounting Standards (including Interpretations) to remove references to AASB 1031.
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 2015-3, enacted in 2015, addresses the need to withdraw AASB 1031 Materiality, an Australian Accounting Standard, by amending AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to supersede AASB 1031. This amendment was issued by the Australian Accounting Standards Board (AASB) in alignment with its policy of not providing unnecessary local guidance on matters covered by International Financial Reporting Standards (IFRSs). The primary objective of AASB 2015-3 is to complete the withdrawal of AASB 1031 and its consequential references in all Australian Accounting Standards and Interpretations. The standard was issued following consultation, including the release of Exposure Draft ED 243 Withdrawal of AASB 1031 Materiality in June 2013, and is applicable to annual reporting periods beginning on or after 1 July 2015, with earlier application permitted for periods beginning on or after 1 January 2014 but before 1 July 2015. The explanatory statement confirms that the standard is compatible with human rights as recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Scope and Application
AASB 2015-3 Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality applies to entities that prepare financial statements in accordance with Australian Accounting Standards. The legislation affects those entities by withdrawing AASB 1031 and amending AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to supersede AASB 1031, as well as making consequential amendments to AASB 108 and deleting references to AASB 1031 in certain Australian Accounting Standards. The AASB’s policy of not providing unnecessary local guidance on matters covered by International Financial Reporting Standards (IFRSs) has driven this change, leading to the withdrawal of AASB 1031 and the consequential amendments required across relevant Standards. AASB 2015-3 is applicable to annual reporting periods beginning on or after 1 July 2015, with earlier application permitted for periods beginning on or after 1 January 2014 but before 1 July 2015. This standard, issued by the AASB, does not diminish or limit any human rights or freedoms, and thus does not raise any human rights issues, aligning with the compatibility requirements outlined in the Human Rights (Parliamentary Scrutiny) Act 2011.
Key Provisions
AASB 2015-3, Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality, primarily addresses the withdrawal of AASB 1031 by amending AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors to supersede AASB 1031 (section 3). It also makes consequential amendments to AASB 108 and removes references to AASB 1031 from the Australian Accounting Standards listed in the Appendix to AASB 2015-3 (section 4). The intent behind these amendments is to ensure that the guidance on materiality remains adequately covered by other standards without the need for redundant local guidance, in alignment with the AASB's policy of not providing unnecessary local guidance on matters already addressed by International Financial Reporting Standards (IFRSs).
The Act imposes several obligations on the entities and individuals it governs. Firstly, entities must ensure that their financial reporting complies with AASB 2015-3 by the applicable reporting period. This means that entities must update their accounting policies and practices to reflect the withdrawal of AASB 1031 and remove any references to AASB 1031 in their financial statements. Additionally, preparers of financial statements must ensure that their disclosures are consistent with the amendments made by AASB 2015-3. The Act also mandates that auditors review financial statements to confirm compliance with AASB 2015-3, ensuring that the standards are correctly applied and that any references to AASB 1031 have been appropriately removed or replaced.
The AASB 2015-3 does not explicitly outline specific offences or penalties for non-compliance with its provisions. However, the broader legislative framework governing financial reporting in Australia, such as the Corporations Act 2001, may impose penalties and consequences for non-compliance. For instance, directors and officers of entities that fail to comply with financial reporting standards may be subject to civil penalties, including fines and disqualification from managing corporations. Auditors who fail to comply with their obligations under the Corporations Act may also face penalties, including fines and disciplinary action. It is important to note that the specific penalties for non-compliance would be governed by the relevant provisions of the Corporations Act and other applicable legislation, rather than AASB 2015-3 itself.