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#CPACONGRESS B1: An accounting standard setting update: Forthcoming standards and major projects Glenn Brady CPA Director - Australian Activities Australian.

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Presentation on theme: "#CPACONGRESS B1: An accounting standard setting update: Forthcoming standards and major projects Glenn Brady CPA Director - Australian Activities Australian."— Presentation transcript:

1 #CPACONGRESS B1: An accounting standard setting update: Forthcoming standards and major projects Glenn Brady CPA Director - Australian Activities Australian Accounting Standards Board Thursday 20 November :10PM - 3:00PM

2 Accounting Standard Setting Update Forthcoming Standards and Major Projects CPA Congress Glenn Brady Director – Australian Activities © Australian Accounting Standards Board 2014

3 3 Agenda © Australian Accounting Standards Board 2014 IASB agenda Domestic agenda NFP / public sector Application issues Addressing complexity in financial reporting AASB communications and engagement

4 4 AASB work program Domestic Agenda Research IASB Agenda NFPs Public Sector RDR SPR Reporting entity Conceptual Framework ETS PIRs FI Leases Insurance Narrow Scope Interpret’ns Disclosure Initiative © Australian Accounting Standards Board 2014

5 5 Revenue from Contracts with Customers © Australian Accounting Standards Board 2014

6 6 Revenue from Contracts with Customers Status IFRS 15 issued by the IASB in May 2014 AASB 15 expected to be issued by the AASB in Q Effective date and transition annual reporting periods beginning on or after 1 January Early application permitted retrospective application (with optional practical expedients) Objective is to develop a common revenue recognition standard for IFRSs and US GAAP that clarifies the principles for recognising revenue and that can be applied consistently across various transactions, industries and capital markets. © Australian Accounting Standards Board 2014

7 7 A framework for recognising revenue Recognise revenue on transfer of goods or services to a customer at an amount that reflects the amount of consideration to which the entity expects to be entitled in exchange for those goods or services 1. Identify contract(s) with customer 2. Identify separate performance obligations 3. Determine transaction price 4. Allocate transaction price 5. Recognise revenue when performance obligation is satisfied Steps to apply the core principle Core principle © Australian Accounting Standards Board 2014

8 8 Financial instruments © Australian Accounting Standards Board 2014

9 9 Financial instruments: Impairment Status IFRS 9 (2014) issued by the IASB in July 2014 AASB 9 (2014) expected to be issued by the AASB in Q Effective date and transition annual reporting periods beginning on or after 1 January Early application permitted The main objective is to provide users of financial statements with more useful information about an entity’s expected credit losses on financial instruments by requiring an entity to: recognise expected credit losses at all times; and update the amount of expected credit losses at each reporting date to reflect changes in the credit risk of the financial instruments. © Australian Accounting Standards Board 2014

10 10 AASB 9 Early application Version of AASB 9 Requirement Classification and measurement of assets Classification and measurement of assets and liabilities Hedge accounting Complete version Classification and measurement Own credit risk * * * Hedge accounting Improvements to C&M Impairment Note: Withdrawal of earlier versions © Australian Accounting Standards Board 2014 * Own credit risk amendments can be applied in isolation of the other AASB 9 amendments

11 11 Leases © Australian Accounting Standards Board 2014

12 12 Leases Status Redeliberations have commenced after considering feedback received on 2 nd Exposure Draft, published in May 2013 Next steps Redeliberations are continuing Standard expected to be issued in 2015 Objective is to provide greater transparency about leverage, the assets an entity uses in its operations, and the risks to which it is exposed from entering into lease transactions © Australian Accounting Standards Board 2014

13 13 Lessee accounting – ED proposals All leases longer than 12 months on balance sheet – lease contract creates a ‘right-of-use’ Lessee Right-of-Use Model Recognise right-of-use asset Liability to make estimated future lease payments Type A Leases (Interest and Amortisation Method) Type B Leases (Single lease expense) Recognised at amortised cost (applying the effective interest method) Short-term leases Recognise only lease expense © Australian Accounting Standards Board 2014

14 14 Latest IASB decisions – a simplification? Recognise lease asset and lease liability Recognise only lease expense Type A leases (single lessee accounting model) Expense recognition based on Interest and Amortisation method i.e. 12 months or less (including leases with options to renew that are not reasonably certain) Short-term leases ‘Small ticket’ leases i.e. small non-specialised assets © Australian Accounting Standards Board 2014

15 15 Domestic agenda: NFP / public sector projects © Australian Accounting Standards Board 2014

16 16 Completing the current domestic NFP/ public sector agenda (cont.) Key projects Service Performance Reporting Service Concession Arrangements Income from Transactions of NFP Entities © Australian Accounting Standards Board 2014

17 17 Income of not-for-profit entities Status AASB ED targeted for Q Effective date Expected to be 1 January 2017; early application permitted Objective is to replace AASB 1004 Contributions with new requirements for recognising income from transactions of Australian NFP entities in the public and private sectors. Those requirements will be based on AASB 15 Revenue from Contracts with Customers. © Australian Accounting Standards Board 2014

18 18 Income of not-for-profit entities Identify a contract Identify performance obligations Enforceable rights and obligations Key issues Donations or other contribution No identified customer required Recognised as income Disclosure Additional NFP requirements © Australian Accounting Standards Board 2014

19 19 Domestic agenda: Application issues © Australian Accounting Standards Board 2014

20 20 Recycling of property, plant and equipment Status Initiated in September 2014 in response to constituent submissions Not limited to not-for-profit entities How can you get involved in the project? Let us know your views: Targeted outreach Q Objective is to consider the accounting for recyclable assets in accordance with the requirements of AASB 116 Property, Plant and Equipment. © Australian Accounting Standards Board 2014

21 21 DRC as a measure of value in use Status Initiated in September 2014 in response to constituent submissions The Board is concerned that it is unclear that depreciated replacement cost as used in AASB 136 does not have the same meaning as current replacement cost as used in AASB 13 How can you get involved in the project? Let us know your views: ED expected Q – Q Objective is to clarify the application of depreciated replacement cost as a measure of value in use for certain assets of not-for-profit entities. © Australian Accounting Standards Board 2014

22 22 FV disclosures for NFP public sector entities Status Initiated in September 2014 in response to feedback by not- for-profit public sector constituents of their concerns relating to the disclosure requirements of AASB 13 How can you get involved in the project? Let us know your views: Targeted outreach Q Objective is to consider whether to modify the disclosures specified by AASB 13 for not-for-profit public sector entities. © Australian Accounting Standards Board 2014

23 23 Addressing complexity in financial reporting © Australian Accounting Standards Board 2014

24 24 Disclosure initiative IASB short-term projects Materiality IAS 1 amendments IASB medium-term projects Research project on presentation and disclosure in IFRS Standards-level review of disclosure Objective is explore how disclosures in financial reporting can be improved. © Australian Accounting Standards Board 2014

25 25 A pragmatic and substantive response to the need to reduce the burden of disclosure requirements on Australian reporting entities Effective from 1 July 2013 Post-implementation review will commence in 2015 Reduced disclosure regime (RDR) © Australian Accounting Standards Board 2014

26 26 Reporting entity: AASB Research Report Key findings Majority lodge SPFS (58.7%)  large proprietary 80% lodge SPFS Classification as reporting entity ≠ SAC 1 factors Variation in application of the reporting entity concept o Different views on the definition of the reporting entity Next steps Policy implications are being discussed with key stakeholders Examined the extent to which financial statements lodged with ASIC are GPFSs or SPFSs and the accounting policies applied in preparing SPFSs. © Australian Accounting Standards Board 2014

27 27 Reporting entity: Recent AASB decisions Tentatively decided that the application paragraphs of Standards that currently apply to corporate non-reporting entities should be amended to apply to reporting entities/GPFSs only Considerable consultation with stakeholders should be undertaken before commencing a formal due process of proposing the amendment AASB 107 AASB 108 AASB 101 AASB 1031 AASB 1048 AASB 1053 AASB 1054 © Australian Accounting Standards Board 2014

28 28 AASB communications and engagement © Australian Accounting Standards Board 2014

29 29 Improved work plan and project communications LinkedIn and web alerts Opportunities for engagement –Exposure drafts and invitations to comment –Project specific outreach and consultation –Research Centre publications –Post-implementation reviews Communicating and engaging with you © Australian Accounting Standards Board 2014

30 30 Your chance to share your views Consultation topicComments close ED 253 Recognition of Deferred Tax Assets for Unrealised Losses 20 November ED 254 Measuring Quoted Investments in Subsidiaries, Joint Ventures and Associates at Fair Value 12 December ITC 32 Reporting the Financial Effects of Rate Regulation15 December © Australian Accounting Standards Board 2014

31 31 Follow us on LinkedIn Register for Alerts to keep up to date See AASB Work Program and Project Summaries for the latest developments on AASB projects See Work in Progress section for all Exposure Drafts and AASB submissions Use Pronouncements search to get a list of mandatory Standards or Interpretations applicable to a particular reporting period Further information © Australian Accounting Standards Board 2014

32 32 Glenn Brady Director – Australian Activities (03) Contact details © Australian Accounting Standards Board 2014

33 33 AASB disclaimer This presentation provides personal views of the presenter and does not necessarily represent the views of the AASB or other AASB staff. Its contents are for general information only and do not constitute advice. The AASB expressly disclaims all liability for any loss or damages arising from reliance upon any information in this presentation. This presentation is not to be reproduced, distributed or referred to in a public document without the express prior approval of AASB staff. © Australian Accounting Standards Board 2014


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