Latest Developments in Accounting Standard-Setting

Transcription

1 Latest Developments in Accounting Standard-Setting LGFP Annual Conference November 2015 Dr Mark Shying AASB Research Fellow

2 Agenda 2 AASB work program & AASB 1057 IASB projects Leases Disclosure Initiative Conceptual Framework Domestic projects Income of Not-for-Profit Entities Service Concession Arrangements: Grantor Service Performance Reporting Australian Financial Reporting Framework Accounting standards aim to portray economic reality, rather than shape it (Extract from Working in the public interest: the IFRS Foundation and the IASB, Hans Hoogervorst & Michael Prada) Agenda consultation Getting involved

3 AASB work program 3 C/Framework Rate Reg n Leases Narrow Scope Insurance Discl. Initiative IASB Agenda DRC-VIU Income of NFPs SCA: Grantor RDR Service Performance Domestic Reporting Agenda IFRS IC IASB Research SBP Taxes. PPM DRM. FICE G will. Primary FS Discl. Initiative Discount rates Equity Method Pensions BCUCC IAS 37 Australian Reporting Framework Carbon tax + Agenda Consultation

4 What is AASB 1057? 4 Relocation of AASB application paragraphs into a single Standard Purpose Specifies the application of all AASB Standards & Interpretations Consequence Application paragraphs removed/ to be removed from other pronouncements Aus application paragraphs excluded from Standards & Interpretations reissued in July-August 2015 Impact on entities No changes to accounting requirements

5 5 IASB projects

6 Leases 6 Objective 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 Project status Redeliberations complete some changes from the ED Standard to be issued in Q (?) Discussion Paper March 2009 Exposure Draft August 2010 Exposure Draft (R) May 2013 Standard Q4 2015

7 Leases 7 Main proposals [forthcoming IFRS 16] Lessee Lessor* Single Model B/S & P&L Operating Lease P&L Finance Lease B/S & P&L Lease exists when customer controls the right to use an asset Exemption for low-value assets Expense recognition based on interest & amortisation method Tentative effective date: 1 January 2019 Transitional relief *Substantially carried forward from IAS 17

8 Research Disclosure Initiative Implementation Disclosure initiative 8 Improving disclosures in GPFS Applying judgement in F/S disclosure [IAS 1] AASB Reconciliation of debt [IAS 7] Std Q Accounting policy vs. accounting estimate [IAS 8] ED Q Materiality Principles of disclosure Standards level review of disclosures ED 271 DP Q TBD

9 Disclosure initiative 9 Uncertain about Materiality? Draft Materiality Practice Statement open for comment Tool to help management make judgements about materiality of presentation & disclosure in financial statements Why a non-mandatory Practice Statement? Guidance & examples What does material information look like? Considerations in evaluating materiality of information More to come: Materiality addressed in Principles of Disclosure

10 Conceptual Framework 10 Objective: To replace the current Australian conceptual framework Target completion: 2016 Objective of general purpose financial reporting The reporting entity Elements of financial statements Recognition & derecognition Presentation & disclosure Concepts of capital Measurement & capital maintenance Qualitative characteristics of useful financial information A complete conceptual framework?

11 11 Domestic projects

12 Income of not-for-profit entities 12 Objective To replace AASB 1004 Contributions and develop not-for-profit application guidance for AASB 15 Revenue from Contracts with Customers Project status AASB currently redeliberating proposals Project plan on AASB website Standard targeted for H Proposed effective date Annual periods beginning on or after 1 January 2017 (defer to 2018?)

13 Income of not-for-profit entities 13 Step 1: The asset Control a transferred resource? (Part B para 11) e.g. Donations, taxes, grants not on commercial terms, below-market loans & leases No No action Yes Volunteer services received? Yes NFP public sector entity? No Elect to recognise volunteer services? (Part B paras 20 & 21) No Volunteer services not recognised No Yes Criteria to recognise volunteer services satisfied? (Part B para 19) No Yes Yes Recognise asset and measure it at fair value (or under AASB 9) (Part B paras 23 & 25)

14 Income of not-for-profit entities 14 Step 2: Treatment of the credit Financial liability? (Part B para 8(a)) No Yes Owner contribution? Part B para 10(b) No Yes Recognise AASB 9 financial liability Recognise as equity Recognise Deferred Income (until performed) Enforceable agreement to make a sufficiently specific transfer of goods/services? (App E paras IG3-18) Another liability incurred? (Part B paras 8(b) & 10(a)) Yes No Yes No Deduct liability from asset to measure income Separately identifiable donation component? (App E paras IG19-30) Yes Split No Recognise Income (AASB 10XX) Apply AASB 15, with consideration allocated to performance obligations (App E paras IG29-30) Contract with customer component Dr Non-financial asset at FV Dr Financial asset Cr Equity Cr Financial liability Cr Deferred Income Cr Other liability Cr Income

15 Service concession arrangements: Grantor 15 Objective To reduce divergence and improve transparency of accounting for service concession arrangements by for-profit and not-for-profit public sector entities Project status AASB currently redeliberating proposals Project plan on AASB website Standard targeted for H Proposed effective date Annual periods beginning on or after 1 January 2017

16 Service concession arrangements: Grantor 16 Recognition & measurement of service concession arrangements Recognise asset provided by operator if grantor controls the asset Recognise liability if service concession asset is recognised Measurement: Fair Value Measurement: Financial liability model: In accordance with AASB 9 Grant of a right to operator model: Unearned revenue released according to substance of the arrangement

17 Service performance reporting 17 Closing the performance reporting gap To develop a standard that establishes the principles for not-for-profit entities to report service performance information that is useful for accountability and decision-making purposes Project status ED 270 open for comment until February 2016 Feedback from AASB Roundtables on AASB website Standard targeted H Proposed effective date Annual periods beginning on or after 1 July 2018

18 Service performance reporting 18 Service performance information is useful when it includes information in relation to an entity s: service performance objectives, inputs, outputs, outcomes, efficiency and effectiveness Service Performance Objectives Efficiency Outputs Inputs Efficiency Outcomes

19 Service performance reporting 19 Applicable to For-profit application Reporting entity Reporting period Status Location NFP entities in private and public sectors Potential future application to for-profit entities Same as financial statements Preference for same as financial statements Mandatory for all NFP entities Location of disclosures not specified Application date Periods beginning on or after 1 July 2018

20 20 Australian financial reporting framework

21 Australian financial reporting framework 21 Current reporting framework Reporting Entity and/or preparing GPFS? No Yes For-profit entity NFP entity Corporations Act requires financial report? Publicly accountable? Yes Tier 1 GPFS No voluntary Private sector Tier 2 GPFS (RDR) No No Public sector Federal, State, Territory or Local Govt? Yes SPFS [AASB 101, 107, 108, 1048, 1053, 1054] No Other SPFS Yes

22 Australian financial reporting framework 22 Objective To clarify and simplify the Australian financial reporting framework, so that objective criteria determine which entities would be required to prepare general purpose financial statements and the level of the reporting requirements Project status Proposals in development Main project conducted in 4 phases Expected to inform related projects on RDR PIR, Control, Group information, XBRL These projects come under the banner of Australian financial reporting framework

23 Australian financial reporting framework 23 Phase 1 Phase 2 Phase 3 Phase 4 Research reporting criteria Corporate financial reporting framework RDR (Tier 2) Non-corporate financial reporting framework Benchmarking exercise Research economic significance & other reporting criteria Develop Consultation Paper with Treasury CP to address objective criteria, identify implications for entities Revise basis for Tier 2 disclosure, and apply Consider communication and processes ED forthcoming Assess reporting requirements for non-corporate entities Consider whether Tier 3 should be developed Underway Q Q TBD Revenue, assets and employee number thresholds still relevant?

24 Reduced disclosure requirements 24 Revising the RDR decision-making framework: proposals Tier 1 Assess current liquidity & solvency Understand events that are significant to entity s operations Core Disclosure Areas Commitments & contingencies Impairment Related parties Subsequent events Supporting Disclosure Areas Nature of transaction Accounting policies Significant accounting estimates & judgments Associated key risks Other Disclosure Areas Cost-benefit constraints Addressed by AASB 101/ AASB 108

25 25 Agenda consultation

26 Agenda consultation 26 Input into the AASB Work Program??? IASB Agenda Consultation (AASB ITC 33): mid work program AASB Agenda Consultation (AASB ITC 34): work program

27 27 Getting involved

28 Getting involved 28 Your chance to be heard Share views at upcoming AASB Education Sessions & Roundtables Comment on Exposure Drafts / Tentative Agenda Decisions Get involved in AASB project specific outreach / consultation Contribute to post-implementation reviews Comment on AASB LinkedIn updates Organise a meeting with AASB staff AASB Agenda Consultation open for comment

29 Getting involved 29 Submit comment letters on the AASB website Select Work in Progress Select Open for comment Select Submit comments to AASB below the relevant proposal document to submit a PDF comment letter

30 Getting involved 30 Follow us on LinkedIn Follow us on Keep up-to-date: Register for Alerts 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 the Pronouncements search tool to identify Standards or Interpretations applicable to a particular reporting period

31 Further information 31 AASB Offices Tel: (03) Dr Mark Shying AASB Research Fellow Tel: (03) 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.