Explanatory Statement
Accounting Standard AASB 2019-4
Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Not-for-Profit Private Sector Entities on Compliance with Recognition and Measurement Requirements
November 2019
EXPLANATORY STATEMENT
Standards Amended by AASB 2019-4
This Standard makes amendments to AASB 1054 Australian Additional Disclosures (May 2011).
Power to Make Amendments
Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument. Accordingly, the AASB has the power to amend the Accounting Standards that are made by the AASB as legislative instruments under the Corporations Act 2001.
Main Features of AASB 2019-4
Main Requirements
This Standard amends AASB 1054 to require not-for-profit private sector entities that are required to apply AASB 1054 (including those required by legislation to do so) and are preparing special purpose financial statements to disclose information about those financial statements, including information that enables users of the financial statements to understand whether or not the material accounting policies applied in the financial statements comply with all the recognition and measurement requirements in Australian Accounting Standards.
In particular, the amendments to AASB 1054 require a not-for-profit private sector entity to:
(a) disclose the basis on which the decision to prepare special purpose financial statements was made;
(b) where the entity has interests in other entities – disclose either:
(i) whether or not its subsidiaries and investments in associates or joint ventures have been consolidated or equity accounted in a manner consistent with the requirements set out in AASB 10 Consolidated Financial Statements or AASB 128 Investments in Associates and Joint Ventures, as appropriate. If the entity has not consolidated its subsidiaries or equity accounted its investments in associates or joint ventures consistently with those requirements, it shall disclose that fact, and the reasons why; or
(ii) that the entity has not assessed whether its interests in other entities give rise to interests in subsidiaries, associates or joint ventures, provided it is not required by legislation to make such an assessment for financial reporting purposes and has not made such an assessment;
(c) for each material accounting policy applied and disclosed in the financial statements that does not comply with all the recognition and measurement requirements in Australian Accounting Standards (except for requirements set out in AASB 10 or AASB 128), disclose an indication of how it does not comply; or if such an assessment has not been made, disclose that fact; and
(d) disclose whether or not the financial statements overall comply with all the recognition and measurement requirements in Australian Accounting Standards (except for requirements set out in AASB 10 or AASB 128) or that such an assessment has not been made.
Application Date
This Standard applies to annual reporting periods ending on or after 30 June 2020. Earlier application is permitted.
References to Other AASB Standards
References in this Standard to the titles of other AASB Standards that are legislative instruments are to be construed as references to those other Standards as originally made and as amended from time to time and incorporate provisions of those Standards as in force from time to time.
Consultation Prior to Issuing this Standard
The AASB issued an Exposure Draft ED 293 Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Compliance with Recognition and Measurement Requirements in July 2019 for comment by 19 August 2019. The Board received twelve written submissions. A webinar on ED 293 was also conducted in July 2019 as part of the education and outreach in relation to this ED. Respondents generally supported the proposals and stated that it would improve transparency and comparability however, argued that certain aspects of Disclosures required changes along with, the illustrative examples and additional guidance. Some respondents also suggested that the scope of the proposals should be limited to not-for-profit entities only.
The AASB considered the feedback and decided to issue AASB 2019-4 to require not-for-profit private sector entities that are required to apply AASB 1054 (including those required by legislation to do so) and are preparing special purpose financial statements to disclose information about those financial statements, including information that enables users of the financial statements to understand whether or not the material accounting policies applied in the financial statements comply with all the recognition and measurement requirements in Australian Accounting Standards. When deciding to limit the application of this Standard to not-for-profit private sector entities only, the Board noted feedback from respondents to ED 293 that if the proposals in ED 297 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities to remove the ability for certain for-profit private sector entities to prepare special purpose financial statements are finalised as proposed, so that they are effective for annual reporting periods beginning on or after 1 July 2020, the requirements of this Standard would only be relevant for a short period of time for these for-profit private sector entities. The Board therefore considered that the costs to prepare the disclosures in this Standard for these for-profit private sector entities would arguably outweigh the benefits. If however the proposals in ED 297 are not finalised as proposed, the Board will reconsider the application of the requirements in this Standard for for-profit private sector entities.
A Regulation Impact Statement (RIS) has not been prepared in connection with the issue of AASB 2019-4 as the amendments made do not have a substantial direct or indirect impact on business or competition.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the
Human Rights (Parliamentary Scrutiny) Act 2011
Accounting Standard AASB 2019-4
Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Not-for-Profit Private Sector Entities on Compliance with Recognition and Measurement Requirements
Overview of the Accounting Standard
This Standard makes amendments to AASB 1054 Australian Additional Disclosures (May 2011).
This Standard amends AASB 1054 to require not-for-profit private sector entities that are required to apply AASB 1054 (including those required by legislation to do so) and are preparing special purpose financial statements to disclose information about those financial statements, including information that enables users of the financial statements to understand whether or not the material accounting policies applied in the financial statements comply with all the recognition and measurement requirements in Australian Accounting Standards.
In particular, the amendments to AASB 1054 require a not-for-profit private sector entity to:
(a) disclose the basis on which the decision to prepare special purpose financial statements was made;
(b) where the entity has interests in other entities – disclose either:
(i) whether or not its subsidiaries and investments in associates or joint ventures have been consolidated or equity accounted in a manner consistent with the requirements set out in AASB 10 Consolidated Financial Statements or AASB 128 Investments in Associates and Joint Ventures, as appropriate. If the entity has not consolidated its subsidiaries or equity accounted its investments in associates or joint ventures consistently with those requirements, it shall disclose that fact, and the reasons why; or
(ii) that the entity has not assessed whether its interests in other entities give rise to interests in subsidiaries, associates or joint ventures, provided it is not required by legislation to make such an assessment for financial reporting purposes and has not made such an assessment;
(c) for each material accounting policy applied and disclosed in the financial statements that does not comply with all the recognition and measurement requirements in Australian Accounting Standards (except for requirements set out in AASB 10 or AASB 128), disclose an indication of how it does not comply; or if such an assessment has not been made, disclose that fact; and
(d) disclose whether or not the financial statements overall comply with all the recognition and measurement requirements in Australian Accounting Standards (except for requirements set out in AASB 10 or AASB 128) or that such an assessment has not been made.
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.