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AASB 1048 Standards/Accounting & Auditing as made
This Standard supersedes AASB 1048 as issued in March 2005.
Administered by: Treasury
General Comments: When applied or operative, this Standard supersedes AASB 1048 - Interpretation and Application of Standards - March 2005. This Standard is superseded by AASB 1048 - Interpretation and Application of Standards - September 2005 [F2005L02863].
Exempt from sunsetting by the Legislation (Exemptions and Other Matters) Regulation 2015 s12 item 18
Registered 06 Jul 2005
Tabling HistoryDate
Tabled HR09-Aug-2005
Tabled Senate09-Aug-2005
Table of contents.

Explanatory Statement

 

 

AASB 1048

June 2005

 

 

 

 

Interpretation and Application of Standards

 

 



EXPLANATORY STATEMENT

Reasons for Issuing AASB 1048

The Australian Accounting Standards Board (AASB) is implementing the directive of the Financial Reporting Council (FRC) to adopt the Standards of the International Accounting Standards Board (IASB) for application to reporting periods beginning on or after 1 January 2005.  In considering the adoption of the Standards of the IASB, the AASB reached the conclusion that it was desirable to issue an Accounting Standard clarifying the status of the pronouncements of the Urgent Issues Group, the UIG Interpretations (previously known as UIG Abstracts), that are approved by the AASB.

All UIG Interpretations have the same authoritative status and those that are equivalent to the IASB Interpretations must be applied to achieve compliance with the International Financial Reporting Standards (IFRSs) of the IASB.

The IASB defines IFRSs as comprising:

(a)       International Financial Reporting Standards;

(b)      International Accounting Standards; and

(c)       Interpretations originated by the International Financial Reporting Interpretations Committee (IFRIC) or the former Standing Interpretations Committee (SIC).

The Australian equivalents to IFRSs are:

(a)       Accounting Standards issued by the AASB that are equivalent to Standards issued by the IASB, being AASBs 1 – 99 corresponding to the IFRS series and AASBs 101 – 199 corresponding to the IAS series; and

(b)      UIG Interpretations issued by the AASB corresponding to the Interpretations adopted by the IASB, as listed in AASB 1048 Interpretation and Application of Standards.

Before identifying the main features of this Standard, the adoption of the IASB Standards is described and the need for a ‘service Standard’ like this is explained.

Adoption of IASB Standards

In implementing the FRC’s directive, the AASB is replacing relevant existing AASB Standards with Australian Standards equivalent to those of the IASB.  The AASB has decided it will continue to issue sector-neutral Standards, that is, Standards applicable to both for-profit and not-for-profit entities, including public sector entities.  Except for Standards that are specific to the not-for-profit or public sectors or that are of a purely domestic nature, the AASB is using the IASB Standards as the “foundation” Standards to which it adds material detailing the scope and applicability of a Standard in the Australian environment.  Additions are made, where necessary, to broaden the content to cover sectors not addressed by an IASB Standard and domestic, regulatory or other issues.

This Standard complements the set of Australian equivalents to each IASB Standard (IFRS and IAS) and Interpretation of the IASB.  This set includes UIG Interpretations that correspond to the IASB Interpretations originated by the IFRIC or the SIC.  When considering the most effective approach to implementing the FRC directive, the AASB decided that Australian-source documents were needed to provide equivalents to the IASB Interpretations, and that these should be UIG Interpretations.  Correlation between the UIG Interpretations and the IASB Interpretations is provided in Table 1 of this Standard.  This Standard will be re-issued when necessary to bring the correlation up to date.

Need for a Service Standard

In the Australian context, UIG Interpretations do not have the same legal status as Standards (delegated legislation) and are treated as ‘external documents’ by the Acts Interpretation Act 1901 (and also by the Legislative Instruments Act 2003).  Although references in one Standard to a second Standard are ambulatory (automatically moving forward to refer to the most recently-issued version of the second Standard), references in a Standard to external documents are stationary (being fixed in time to refer to the contents of the external document when the Standard was issued).  A reference to an UIG Interpretation in an AASB Standard issued earlier (for example, in July 2004) than the reporting date at the end of the first effective reporting period can only refer to the Interpretation that existed then (in July 2004).  It cannot refer to any revised version of the UIG Interpretation that may exist at the nominated reporting date (for example, 30 June 2006).  However, an AASB Standard can be issued in July 2004, referring to a second AASB Standard (existing in July 2004) and, when the first Standard is applied at 30 June 2006, the reference will be to the then-current version of the second Standard, even if it has been re-issued after July 2004.

 

After analysing the issues, the AASB decided the service Standard approach constitutes the most effective way to ensure that the compliance required in the Australian equivalent of IFRS 1, AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, has the same meaning as intended in IFRS 1.

 

The service Standard approach involves issuing an AASB Standard listing the UIG Interpretations corresponding to each IASB Interpretation, and referring to that Standard in every other AASB Standard where necessary to refer to an UIG Interpretation.  This enables references to UIG Interpretations in all other AASB Standards to be updated by re-issuing the service Standard.

 

This approach preserves the status of UIG Interpretations as ‘external documents’ referred to in a Standard, with the ‘contents’ fixed in time to that existing when the Standard takes effect.  It does not treat the UIG Interpretations as delegated legislation or confer ambulatory status on the reference.  In each AASB Standard where there is a need to refer to an Australian equivalent of an IASB Interpretation, the reference will be to this Standard, phrased as “UIG Interpretation (number) (title) identified in AASB 1048 as corresponding to IFRIC (or SIC) (number)”.  This reference, being to another AASB Standard, is ambulatory and will refer to the Standard, AASB 1048, that is in force from time to time.  AASB 1048 itself will contain the direct references to the external documents and it will be re-issued to keep all references to UIG Interpretations in the other Standards up to date.

 

Implementation of this approach to clarifying the status of UIG Interpretations ensures there is no difference between the status in the hierarchy accorded to Interpretations in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors compared to AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.

 

A further advantage of this approach, compared to alternative approaches, is that it is able to be combined with implementing the perceived need for an AASB Standard clarifying the status of all UIG Interpretations, irrespective of whether they correspond to an IASB Interpretation.

The Standard will be re-issued when necessary to keep the listing up to date.  All UIG Interpretations listed in the Standard will be available on the AASB’s website (www.aasb.com.au) and able to be downloaded without charge.

AASB 1048 (June 2005)

At its meeting on 8-9 June 2005, the AASB approved three more UIG Interpretations (equivalents to IFRIC Interpretations 4 and 5, and UIG Interpretation 1052) and decided to re-issue AASB 1048 so as to include these new Interpretations and also UIG Interpretation 1013, which was approved at its meeting on 13-14 April 2005.

This Standard (issued in June 2005) supersedes the previous version of AASB 1048, issued in March 2005.

Application Date

This Standard is applicable in general to annual reporting periods ending on or after 31 December 2005, with exceptions for particular Interpretations (see paragraph 3, AASB 1048).  To be consistent with the position for AASB Standards equivalent to IFRSs, early adoption of this Standard is not permitted for annual reporting periods beginning before 1 January 2005.  However, early adoption is otherwise permitted as specified in paragraph 4, AASB 1048.

First-time Application and Comparatives

When an entity first applies this Standard in the context of adopting all Australian equivalents to IFRSs, AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, the Australian equivalent of IFRS 1, generally requires prior period information, presented as comparative information, to be restated as if the requirements of the Australian equivalents to IFRSs (including those UIG Interpretations equivalent to the IASB Interpretations) had always applied.  This differs from the requirements in previous Australian Standards, where changes in accounting policies did not require the restatement of the income statement and balance sheet of the preceding period.

Main Requirements

This Standard identifies the UIG Interpretations and classifies them into two groups:  those that correspond to each IASB Interpretation and those that do not.  The Standard will be re-issued when necessary to keep it up to date.

In respect of the first group (Table 1), it is necessary for those UIG Interpretations, where relevant, to be applied in order for an entity to be able to make an explicit and unreserved statement of compliance with IFRSs.  The IASB defines IFRSs to include the IFRIC and SIC Interpretations.

In the second group (Table 2), this Standard lists the other UIG Interpretations, that do not correspond to the IASB Interpretations, to assist financial report preparers and users to identify the other authoritative pronouncements necessary for compliance in the Australian context.

Changes from AASB 1048 (March 2005)

The differences between AASB 1048 (issued in March 2005) and this version issued in June 2005 are the addition of two UIG Interpretations to Table 1 in paragraph 10 of the Standard and the addition of two UIG Interpretations to Table 2 in paragraph 11 of the Standard, as set out in the following tables.

Table 1 – Additions

 

UIG Interpretation
Issue Date

 

Title

IFRIC or SIC

 

UIG Interpretation

June 2005

4

Determining whether an Arrangement contains a Lease

IFRIC 4

 

UIG Interpretation

June 2005

5

Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

IFRIC 5

 

Table 2 – Additions

 

UIG Interpretation

Issue Date

 

Title

 

UIG Interpretation

April 2005

1013

Consolidated Financial Reports in relation to
Pre-Date-of-Transition Stapling Arrangements

 

UIG Interpretation

June 2005

1052

Tax Consolidation Accounting

 

Consultation prior to Issuing this Standard

Public consultation was part of the process undertaken by the UIG prior to its decisions to approve UIG Interpretations 4, 5, 1013 and 1052.  Accordingly, there appeared no need for the AASB to undertake further public consultation in respect of this Standard.  In making this Standard, the AASB was mindful of its obligations under section 334 of the Corporations Act 2001 and also that failure to maintain an up-to-date register of UIG Interpretations corresponding to the IASB Interpretations could endanger compliance with the FRC directive on adoption of IFRSs in Australia.

 

A Regulatory Impact Statement has not been prepared in connection with the issue of this Standard as the amendments it makes do not have a direct, or substantial indirect, effect on business or restrict competition, are of a minor or machinery nature and do not substantially alter existing arrangements.