Will you be reporting equity in your balance sheet in 2005?

How will your annual reports be impacted if all of your share capital is disclosed as debt? Are you ready to prepare your opening IFRS balance sheet on 1 July 2004? Can you explain in your 30 June 2004 statement how the transition to IFRSs is being managed in your organisation

What is happening to accounting standards in Australia? Australian entities must prepare financial reports for financial years beginning on or after I January 2005 using Australian Equivalents to International Financial Reporting Standards IASB issuing IFRS or IAS Australian exposure drafts Australian equivalent standard issued (initially as a pending standard)

Applies to whom? Corporations Act State co-operative legislation All reporting entities Private and public sector

Reporting entity An entity in respect of which it is reasonable to expect the existence of users who rely on the entity’s general purpose financial report for information that will be useful to them for making and evaluating about the allocation of resources. A reporting entity can be a single entity or a group comprising a parent and all of its subsidiaries.

Key dates Reporting periods beginning on/after 1 January 2005 Balance date 30 June First full IFRS statements 30 June 2006 Requires comparatives 30 June 2005 and therefore opening balances as at 1 July 2004 Balance date 31 December First full IFRS statements 31 December 2005 Requires comparatives 31 December 2004 and therefore opening balances as at 1 January 2004

Financial statements Balance sheet Income statement Statement of changes in equity Statement of cash flows Notes to the financial statements

Issues First time adoption of IFRS Impact statement Financial Statements Revenue Assets - fair value or deemed cost Impairment of assets Intangibles Financial instruments – share capital

AASB 1 First Time Adoption Number of choices have the potential to dramatically affect reported results. Choice of accounting policies should be determined by the date of the opening balance sheet to ensure the correct information can be collected. Adjustments required to move from Australian GAAP to IFRS at the time of first time adoption – retained earnings

AASB 1 First Time Adoption Disclosures Reconciliation of Australian GAAP and IFRS Equity (at transition and comparative) Profit and loss (comparative) Explanations of material adjustments that were made in adopting IFRS for the first time, to the balance sheet, operating statement and cash flow statement.

AASB 1047: Disclosing the Impact of Adopting AASB Equivalents to IASB Standards Must provide in 30 June 2004 statements an explanation of how the transition to AASB equivalents of international standards is being managed; and Disclose narrative definitions of key differences in accounting policies expected to arise as a result of the transition.

AASB 1: Asset values All recognised assets and liabilities must be measured in accordance with IFRS. Entities need to assess the different methods of valuation of assets allowed by the standard. Options available depend on whether using historical cost, fair value or deemed cost under Australian GAAP, and whether they intend to use the cost or fair value basis under IFRS.

IAS 36 Impairment of assets More prescriptive & robust than AASB 1010 IAS 36 does not restrict the recoverable amount to non-current assets All assets except inventories, deferred tax assets, assets arising from employee benefits and most financial assets Assets carried at fair value and cost Impairment test annual or when impairment indicated.

Intangible assets No current Australian standard – only requirement is to amortise goodwill Variety of treatment in Australian practice Internally generated goodwill, brands, mastheads, publishing titles, start up costs, customer lists & similar may not be recognised as assets Indefinite life intangibles are permitted Definite life intangibles must be amortised

Intangible assets – Research and Development All expenditure on research must be recognised as an expense Development costs may be capitalised if specific criteria are met

Financial Instruments Includes cash, term deposits, accounts and loans receivable and payable, debt and equity securities AASB 132 clarifies the classification of a financial instrument issued by an entity as a liability or as equity

Co-operative Equity Concerns Where equity instruments have a contractual obligation to deliver cash or another financial asset to another entity they are to be recognised as liabilities This applies to co-ops where shares are redeemed on exiting the co-op If shares are classified as liabilities, related interest, dividends, losses and gains must be classified as expenses and revenues Possible negative impacts on ability to raise finance

Urgent issues to consider Capturing the new information that needs to be disclosed Policy development where changes in recognition and measurement are involved Possible consequences of proposed changes in classification of equity