INTRODUCTION
The objective of this Technical Accounting (TA) Alert is to:
- provide information regarding the Accounting Standards (and Interpretations) that have been issued with an effective date post 31 December 2024; and
- assist entities in meeting the disclosure requirements in paragraph 30 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.
OVERVIEW
When the AASB issues a new or revised Standard (or an Interpretation)1 with an effective date after the end of the reporting period, an entity2 has a choice of either:
- early adoption of the Standards in accordance with section 334(5) of Corporations Act 2001 (via a Director’s minute – an example is included in this Alert) and disclosing this fact in the financial statements; or
- not adopting the Standard; in which case the entity must comply with paragraph 30 of AASB 108.
As of the date of publication, one accounting standard has been issued by the International Accounting Standards Board (“IASB”) and not adopted by the Australian Accounting Standards Board – IFRS 19 Subsidiaries without Public Accountability: Disclosures. As described below, this standard is required to be included when applying paragraphs 30 & 31 of AASB 108.
Requirements of paragraph 30 of AASB 108
30 When an entity has not applied a new Australian Accounting Standard that has been issued but is not yet effective, the entity shall disclose:
a) this fact; and
b) known or reasonably estimable information relevant to assessing the possible impact that application of the new Australian Accounting Standard will have on the entity’s financial statements in the period of initial application.
Furthermore, paragraph 31 of AASB 108 states that in complying with paragraph 30 an entity should consider disclosing:
a) the title of the new Australian Accounting Standard;
b) the nature of the impending change or changes in accounting policy;
c) the date by which application of the Australian Accounting Standard is required;
d) the date at which the entity plans to apply the Australian Accounting Standard initially; and
e) either:
i. a discussion of the impact that initial application of the Australian Accounting Standard is expected to have on the entity’s financial report; or
ii. if the impact is not known or reasonably estimable; a statement to that effect.
These requirements are extended to standards which are issued by the IASB but not yet by the AASB by paragraph 17 of AASB 1054 Australian Additional Disclosures.
Standards and Interpretations with an effective date post 31 December 2024
The table following (pages 3 - 5) summarises all Accounting Standards (and Interpretations) that have been issued by the AASB and IASB as at 26 November 2024. Any further Standards (and Interpretations) issued after this date will also need to be disclosed up until the date of authorisation of the financial report.
Although the table lists most of the Standards (and Interpretations) issued but not yet effective, entities should only disclose Standards (and Interpretations) that are relevant to them. For instance, a for-profit entity does not need to disclose the impact of a new Standard that only applies to entities in the not-for-profit sector.
In addition, it is important that the sample disclosure/indicative impact for each Standard and Interpretation is tailored to suit the particular circumstances of each entity. Entities should pay particular attention to this disclosure, noting that the Australian Securities and Investments Commission (ASIC) has been expressing concerns over a number of years with entities providing ‘boiler plate’ disclosures. The document Globally consistent reporting for sustainability-related information may be of particular assistance where disclosure is influenced by sustainability-related factors.
Entities applying Australian Accounting Standards – Simplified Disclosures (SD)
Tier 2 entities reporting under the Simplified Disclosure (SD) regime are not required to disclose Accounting Standards issued but not yet effective. Accordingly, no SD-related amendments have been included in the table. Given the relative significance of different standards not yet effective, entities may choose to make related disclosures on an optional basis. We encourage entities to consider disclosure where the impact is potentially material.
Early adoption of Standards
Where Standards or Interpretations are adopted early, the following Director’s minutes may be used for Corporations Act entities3:
“In accordance with s334(5) of the Corporations Act, the Directors are early adopting the following Accounting Standards:
- AASB xxxx
- Interpretation yy”
| New / revised pronouncement |
Superseded pronouncement |
Nature of change |
Effective date (annual reporting periods beginning on or after) |
Likely impact on initial application |
|
|
None
|
The amendments address a current inconsistency between AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures.
The amendments clarify that, on a sale or contribution of assets to a joint venture or associate or on a loss of control when joint control or significant influence is retained in a transaction involving an associate or a joint venture, any gain or loss recognised will depend on whether the assets or subsidiary constitute a business, as defined in AASB 3 Business Combinations. Full gain or loss is recognised when the assets or subsidiary constitute a business, whereas a partial gain or loss attributable to other investors’ interests is recognised when the assets or subsidiary do not constitute a business.
This amendment effectively introduces an exception to the general requirement in AASB 10 to recognise full gain or loss on the loss of control over a subsidiary. The exception only applies to the loss of control over a subsidiary that does not contain a business, if the loss of control is the result of a transaction involving an associate or a joint venture that is accounted for using the equity method. Corresponding amendments have also been made to AASB 128.
|
1 January 2022*
*AASB 2014-10 has been deferred via the cumulative effects of AASB 2017-5, AASB 2021-7c and AASB 2024-4 until financial reporting periods commencing on or after 1 January 2028.
|
[If the entity has concluded that there will be no material impact.]
When these amendments are first adopted for the year ending 31 December 2028, there will be no material impact on the financial statements.
[If the entity has concluded that there will be a material impact.]
Based on the entity’s assessment, it is expected that the first-time adoption of these amendments for the year ending 31 December 2028 will have a material impact on the financial statements, in particular:
- (insert impact)
- (insert impact)
|
|
|
None
|
AASB 2022-9:
- amends AASB 17 Insurance Contracts to include modifications that apply to public sector entities;
- amends AASB 1050 Administered Items to provide an accounting policy choice for government departments to apply either AASB 17 or AASB 137 Provisions, Contingent Liabilities and Contingent Assets in determining the information to be disclosed about administered captive insurer activities; and
- repeals AASB 4 Insurance Contracts and AASB 1023 General Insurance Contracts and reverses the temporary consequential amendments set out in AASB 2022-8 that amended various Standards to permit public sector entities to continue applying AASB 4 and AASB 1023 to annual periods beginning on or after 1 January 2023 but before 1 July 2026 given AASB 17 applies to all entities for annual periods beginning on or after 1 July 2026.
|
1 July 2026
|
[If the entity has concluded that there will be no material impact.]
When these amendments are first adopted for the year ending 31 December 2027, there will be no material impact on the financial statements.
[If the entity has concluded that there will be a material impact.]
Based on the entity’s assessment, it is expected that the first-time adoption of these amendments for the year ending 31 December 2027 will have a material impact on the financial statements, in particular:
- (insert impact)
- (insert impact)
|
|
|
None
|
AASB 2023-5 amends AASB 121 The Effects of Changes in Foreign Exchange Rates and AASB 1 First-time Adoption of Australian Accounting Standards to improve the usefulness of information provided to users of financial statements. The amendments require entities to apply a consistent approach to determining whether a currency is exchangeable into another currency and the spot exchange rate to use when it is not exchangeable.
|
1 January 2025
|
[If the entity has concluded that there will be no material impact.]
When these amendments are first adopted for the year ending 31 December 2025, there will be no material impact on the financial statements.
[If the entity has concluded that there will be a material impact.]
Based on the entity’s assessment, it is expected that the first-time adoption of these amendments for the year ending 31 December 2025 will have a material impact on the financial statements, in particular:
- (insert impact)
- (insert impact)
|
|
|
None
|
This amending standard amends AASB 9 Financial Instruments and AASB 7 Financial Instruments: Disclosures to clarify how the contractual cash flows from financial assets should be assessed when determining their classification. The amendment also clarifies the derecognition requirements of financial liabilities that are settled through electronic payment systems.
|
1 January 2026
|
[If the entity has concluded that there will be no material impact.]
When the amendment is first adopted for the year ending 31 December 2026, there will be no material impact on the financial statements.
[If the entity has concluded that there will be a material impact]
Based on the entity’s assessment, it is expected that the first-time adoption of these amendments for the year ending 31 December 2026 will have a material impact on the financial statements, in particular:
- (insert impact)
- (insert impact).
|
|
|
None
|
AASB 2024-3:
- amends AASB 1 First-time Adoption of Australian Accounting Standards to improve consistency between exceptions for retrospective application of hedging accounting and the requirements for hedge accounting in AASB 9;
- amends AASB 7 Financial Instruments: Disclosures to replace a deleted cross-reference with a reference to AASB 13 Fair Value Measurement; and improve consistency in the language used in AASB 7 with the language used in AASB 13;
- amends AASB 9 Financial Instruments to clarify how a lessee accounts for the derecognition of a lease liability when it is extinguished; and addresses an inconsistency between AASB 9 and the requirements in AASB 15 Revenue from Contracts with Customers in relation to the term ‘transaction price’;
- amends AASB 10 Consolidated Financial Statements in relation to determining de facto agents of an entity; and
- amends AASB 107 Statement of Cash Flows to replace the term ‘cost method’ with ‘at cost’ as the term is no longer defined in Australian Accounting Standards.
|
1 January 2026
|
[If the entity has concluded that there will be no material impact.]
When the amendment is first adopted for the year ending 31 December 2026, there will be no material impact on the financial statements.
[If the entity has concluded that there will be a material impact]
Based on the entity’s assessment, it is expected that the first-time adoption of these amendments for the year ending 31 December 2026 will have a material impact on the financial statements, in particular:
- (insert impact)
- (insert impact).
|
|
|
AASB 101 Presentation of Financial Statements
|
AASB 18 replaces AASB 101 as the standard describing the primary financial statements and sets out requirements for the presentation and disclosure of information in AASB-compliant financial statements. Amongst other changes, it introduces the concept of the “management-defined performance measure” to financial statements and requires the classification of transactions presented within the statement of profit or loss within one of five categories – operating, investing, financing, income taxes, and discontinued operations. It also provides enhanced requirements for the aggregation and disaggregation of information.
|
1 January 2027* & 1 January 2028**
*For-profit entities (other than superannuation entities applying AASB 1056 Superannuation Entities) preparing Tier 1 general purpose financial statements, with earlier application permitted.
** Not-for-profit private and public sector entities and superannuation entities applying AASB 1056, with earlier application permitted.
|
[If the entity has concluded that there will be no material impact.]
When the standard is first adopted for the year ending 31 December 2027, there will be no material impact on the financial statements.
[If the entity has concluded that there will be a material impact]
Based on the entity’s assessment, it is expected that the first-time adoption of these amendments for the year ending 31 December 2027 will have a material impact on the financial statements, in particular requiring the presentation of the statement of comprehensive income to be amended such that transactions are classified as one of five categories – operating, investing, financing, income taxes, and discontinued operations. Certain management-defined performance measures utilised in communications with stakeholders by management will also require presentation and additional disclosure in the financial statements.
[If the entity has concluded that there will be a material impact, but not yet determined the extent of the impact]:
The entity has not undertaken an assessment as to the impact of these changes at this stage, OR, The entity has determined that the impacts on the statement of comprehensive income will be as follows:
[If the entity has concluded that there will be a material impact, and has determined the extent of the impact]:
The entity has determined that the impacts on the statement of comprehensive income will be as follows:
|
|
|
None
|
IFRS 19 Subsidiaries without Public Accountability: Disclosures specifies the disclosure requirements that eligible subsidiaries are permitted to apply instead of the disclosure requirements in other IFRS accounting standards.
IFRS 19 applies to an entity’s consolidated, separate or individual financial statements if at the end of the reporting period:
- it is a subsidiary;
- it does not have public accountability; and
- it has an ultimate or intermediate parent that produces consolidated financial statements available for public use that comply with IFRS Accounting Standards.
Subsidiaries are eligible to apply IFRS 19 if they do not have public accountability (i.e., the entity does not have equities or debt listed on a stock exchange and does not hold assets in a fiduciary capacity for a broad group of outsiders) and their parent company produces consolidated financial statements available for public use that comply with IFRS Accounting Standards.
IFRS 19 is available to use immediately, subject to jurisdictional endorsement. As of the date of this TA Alert, it had not yet been adopted within Australia, however paragraph 17 of AASB 1054 Australian Additional Disclosures requires that standards issued by the IASB and not by the AASB be considered as for disclosure in accordance with paragraphs 30 and 31 of AASB 108.
Currently, IFRS 19 has not been adopted in Australia– that is, it is only adoptable at election of the preparer, and not where compliance with Australian Accounting Standards is required as it has not been adopted by the AASB. We note that it is unlikely that IFRS 19 will have a material impact on entities as it will not impact recognition, measurement, presentation or disclosure for entities preparing Tier 1 or Tier 2 financial statements in Australia.
|
1 January 2027
|
[If the entity has concluded that there will be no material impact.]
When the standard is first adopted for the year ending 31 December 2027, there will be no material impact on the financial statements.
|
ACTION REQUIRED
With the 31 December 2024 reporting season commencing, entities should now take time to review and consider the impact of new and revised accounting standards that have been issued but are not yet effective. This is particularly important considering that ASIC is looking to scrutinise disclosures in this area.
FURTHER INFORMATION
If you wish to discuss any of the information included in this Technical Accounting Alert, please get in touch with your local Grant Thornton Australia contact or a member of the National Assurance Quality Team at national.assurance.quality@au.gt.com.
1) Where an entity includes an explicit and unreserved statement of compliance with International Financial Reporting Standards (IFRSs) as required by paragraph 16 of AASB 101 Presentation of Financial Statements, the entity needs to consider Standards issued by the IASB but not yet issued by the AASB. This is likely to apply to all entities, except for those issuing special purpose financial statements and not-for-profit entities.
2) The requirements of paragraph 30 of AASB 108 are mandatory for all entities preparing financial statements under Part 2M.3 of the Corporations Act 2001 and for those preparing general purpose financial statements (excluding entities applying Australian Accounting Standards – Simplified Disclosures).
3) Section 334(5) of Corporations Act 2001 states that a company, registered scheme or disclosing entity may elect to apply the Accounting Standard to an earlier period unless the Standard says otherwise. The election must be made in writing by the Directors.
