«AASB Standard AASB 2013-9 December 2013 Amendments to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments ...»
Amendments to Interpretation 19 94 Amendments to Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments in paragraph 71 of AASB 2010-7 are amended
to read as follows:
Amendments to Interpretation 107 The heading ‘Amendments to Interpretation 107’ is added immediately below paragraph 71 of AASB 2010-7.
96 Paragraph 71A is added immediately below the heading inserted by the
AASB 2013-9 makes amendments to:
AASB 1 First-time Adoption of Australian Accounting Standards;
AASB 3 Business Combinations;
AASB 4 Insurance Contracts;
AASB 5 Non-current Assets Held for Sale and Discontinued Operations;
AASB 7 Financial Instruments: Disclosures;
AASB 9 Financial Instruments (December 2009);
AASB 9 Financial Instruments (December 2010);
AASB 101 Presentation of Financial Statements;
AASB 102 Inventories;
AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors;
AASB 112 Income Taxes;
AASB 118 Revenue;
AASB 120 Accounting for Government Grants and Disclosure of Government Assistance;
AASB 121 The Effects of Changes in Foreign Exchange Rates;
AASB 132 Financial Instruments: Presentation;
AASB 134 Interim Financial Reporting;
AASB 136 Impairment of Assets;
AASB 139 Financial Instruments: Recognition and Measurement;
AASB 1023 General Insurance Contracts;
AASB 1038 Life Insurance Contracts;
AASB 1049 Whole of Government and General Government Sector Financial Reporting;
AASB 1050 Administered Items;
AASB 1051 Land Under Roads;
AASB 1052 Disaggregated Disclosures;
AASB 1055 Budgetary Reporting;
AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9;
AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010);
AAS 25 Financial Reporting by Superannuation Plans;
Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities;
Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments;
Interpretation 4 Determining whether an Arrangement contains a Lease;
Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds;
Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment;
Interpretation 7 Applying the Restatement Approach under AASB 129 Financial Reporting in Hyperinflationary Economies;
Interpretation 9 Reassessment of Embedded Derivatives;
Interpretation 10 Interim Financial Reporting and Impairment;
Interpretation 13 Customer Loyalty Programmes;
Interpretation 14 AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction;
Interpretation 15 Agreements for the Construction of Real Estate;
Interpretation 16 Hedges of a Net Investment in a Foreign Operation;
Interpretation 17 Distributions of Non-cash Assets to Owners;
Interpretation 18 Transfers of Assets from Customers;
Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments;
Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine;
Interpretation 21 Levies;
Interpretation 107 Introduction of the Euro;
Interpretation 110 Government Assistance – No Specific Relation to Operating Activities;
Interpretation 115 Operating Leases – Incentives;
Interpretation 125 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders;
Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a Lease;
Interpretation 129 Service Concession Arrangements: Disclosures;
Interpretation 131 Revenue – Barter Transactions Involving Advertising Services;
Interpretation 132 Intangible Assets – Web Site Costs;
Interpretation 1003 Australian Petroleum Resource Rent Tax;
Interpretation 1019 The Superannuation Contributions Surcharge;
Interpretation 1030 Depreciation of Long-Lived Physical Assets: ConditionBased Depreciation and Related Methods;
Interpretation 1038 Contributions by Owners Made to Wholly-Owned Public Sector Entities;
Interpretation 1042 Subscriber Acquisition Costs in the Telecommunications Industry;
Interpretation 1047 Professional Indemnity Claims Liabilities in Medical Defence Organisations;
Interpretation 1052 Tax Consolidation Accounting; and Interpretation 1055 Accounting for Road Earthworks.
Background BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the decision to ultimately withdraw AASB 1031 Materiality with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, which gave rise to paragraphs 37-44 of Part B of this Standard.
Individual Board members gave greater weight to some factors than to others.
BC2 In adopting International Financial Reporting Standards (IFRSs) in 2005, the AASB issued AASB 1031 (July 2004). At the time IFRSs were first incorporated into the Australian Accounting Standards (including Interpretations), the Board decided to retain a revised version of AASB 1031 to help ensure that the meaning of materiality remained well explained, as the Framework for the Preparation and Presentation of Financial Statements on issue at that time included only limited guidance on materiality in comparison to AASB 1031.
BC3 In September 2010, the IASB issued a revised Conceptual Framework on Financial Reporting (IASB Conceptual Framework).
The revised IASB Conceptual Framework contains updated guidance on materiality in Chapter 3 Qualitative Characteristics of Useful Financial Information.
BC4 At its February 2012 meeting, the Board considered whether AASB 1031 remained necessary in light of the guidance on materiality available in existing Accounting Standards and in the revised IASB Conceptual Framework.1 The Board also considered whether retaining AASB 1031 was consistent with the AASB’s strategies and policies, including the AASB’s policy of not providing unnecessary local guidance on matters covered by IFRSs.
BC5 In June 2013, Exposure Draft ED 243 Withdrawal of AASB 1031 Materiality was issued for comment. This Exposure Draft proposed to withdraw AASB 1031 and delete references to that Standard from 1 An amended AASB Framework for the Preparation and Presentation of Financial Statements, incorporating Chapters 1 and 3 of the revised IASB Conceptual Framework for Financial Reporting was issued in December 2013.
AASB 2013-9 139 BASIS FOR CONCLUSIONSAustralian Accounting Standards, including Interpretations.
Following the consultation period and after reviewing constituent comments, at its October 2013 meeting the Board decided to proceed with the withdrawal of AASB 1031. This decision is consistent with the Board’s view that the principle-based guidance on materiality in Australian Accounting Standards (that incorporate IFRSs) and the IASB Conceptual Framework is adequate.
BC6 In making its decision to ultimately withdraw AASB 1031, the Board noted that it would not expect the withdrawal to change practice regarding the application of materiality in financial reporting. In particular, amendments would not change the level of disclosure presently specified by other accounting standards.
BC7 At its December 2013 meeting, the Board decided to effect the withdrawal of AASB 1031 by first reissuing AASB 1031 as an interim Standard that cross-references to other Australian Accounting Standards and the Framework (December 2013) that contain guidance on materiality. Once all the references to AASB 1031 have been deleted from Australian Accounting Standards AASB 1031 will be withdrawn.
Scope of paragraphs 37-44 of Part B of this Standard BC8 Part B of this Standard makes amendments, including the deletion of references to AASB 1031, to Australian Accounting Standards.
(a) do not include a broader consideration of terminology associated with ‘materiality’ used in Australian Accounting Standards; and (b) retain much of the existing guidance on materiality included in AASB 1023 General Insurance Contracts and AASB 1038 Life Insurance Contracts.
BC9 In relation to paragraph BC8(a), paragraph BC26 of AASB 1055 Budgetary Reporting notes that the Board decided it would reconsider the suitability of referring to ‘major’ variances, given the role materiality plays in Standards, in due course as part of a broader consideration of terminology associated with ‘materiality’ used in a range of Standards. The term ‘major’ is used in various Australian Accounting Standards, including those that incorporate IFRSs, along with other related terms such as ‘significant’, ‘key’ and ‘main’. The Board noted that the use of synonyms appears to have contributed to
AASB 2013-9 140 BASIS FOR CONCLUSIONSthe confusion around the application of materiality. However, the Board decided not to reassess terminology associated with materiality as part of the proposal to supersede AASB 1031 so as not to further delay the withdrawal and noting that concerns about terminology are not restricted to Australian specific issues in Australian Accounting Standards as similar terms are used in IFRSs.
BC10 In relation to paragraph BC8(b), AASB 4 Insurance Contracts (which incorporates IFRS 4 of the same name) requires limited improvements to accounting by insurers for insurance contracts and disclosure that identifies and explains the amounts in an insurer’s financial statements arising from insurance contracts and that helps users of those financial statements understand the amount, timing and uncertainty of future cash flows from insurance contracts. AASB 4 is acknowledged by the AASB to be an interim standard (as IFRS 4 is by the IASB) and is not comprehensive. AASB 4 permits existing accounting policies for insurance contracts to be changed only where the change makes the financial statements more relevant to the economic decision-making needs of users and no less reliable, or more reliable and less relevant to those needs.
BC11 The Board’s policy is to limit amendments to AASB 1023 and AASB 1038 until Phase 2 of the IASB’s insurance contracts project is complete. Because references to materiality in paragraphs 5.1.2 and 17.1.2 of AASB 1023 and in paragraphs 8.1.4 and 14.1.4 of AASB 1038 are similar to references occasionally made in IFRSs2 as to what might or might not be material, the Board concluded that these references should be retained unrevised at present.
Amendments to Other Australian Accounting Standards Amendments to AASB 134 Interim Financial Reporting BC12 AASB 1031 identified quantitative thresholds and noted the context within which those thresholds may be used as guidance in considering the materiality of items in the financial statements. For consistency, at the time of making AASB 134, the AASB deleted the sentence in paragraph 24 of the corresponding IFRS that referred to the exclusion of quantitative guidance as to materiality. The deletion of that sentence is no longer necessary, and consequently, the 2 For example, paragraph 17 of IAS 19 Employee Benefits explains when a sick leave obligation is likely to be material and paragraph 138 requires an entity to assess whether disclosures should be disaggregated to distinguish plans with materially different risks.
AASB 119 Employee Benefits incorporates IAS 19.
AASB 2013-9 141 BASIS FOR CONCLUSIONSparagraph is reinstated as part of the amendments arising from the withdrawal of AASB 1031.
Amendments to AASB 1023 and AASB 1038 BC13 As noted in paragraph BC11 above, the Board’s policy is to limit amendments to AASB 1023 and AASB 1038 until Phase 2 of the IASB’s insurance contracts project is complete. However, the applicability of the disclosure requirements of these Standards to a group with a general insurance business or a life insurance business can be deduced from the definition of materiality in AASB 101 and AASB 108 and the requirement in paragraph 31 of AASB 101 that an entity need not provide a specific disclosure required by an Australian Accounting Standard if the information is not material. Accordingly, Part B of this Standard deletes paragraph 1.4.1 from both AASB 1023 and AASB 1038 to remove the examples of the application of materiality in the context of AASB 1031.
Interaction with the amended AASB Framework for the Preparation and Presentation of Financial Statements BC14 As noted in the footnote to paragraph BC4 above, the revised IASB Conceptual Framework has been incorporated into an amended AASB Framework for the Preparation and Presentation of Financial Statements (Framework). The Board decided that the application date of Part B of this Standard and the reissued AASB 1031 should be later than the application date of the amendments to the Framework, to ensure that the guidance on materiality available to Australian entities is consistent with that in IFRSs. For this reason, the Board also decided that early adoption of Part B of this Standard would not be allowed, because the amendments to the AASB Framework only became effective on 20 December 2013.
BC15 The IASB has made amendments to IFRSs to acknowledge the revised IASB Conceptual Framework guidance pertaining to materiality. For example, a footnote has been added to the relevant paragraph in IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to note that Chapter 3 of the IASB Conceptual Framework has superseded paragraph 25 of the former IASB Framework for the Preparation and Presentation of Financial Statements. The AASB has made similar amendments to the Australian Accounting Standards (including Interpretations), through Part A of this Standard.