New standards for 31 December 2019
We know that the new leases standard AASB 16 is kicking in at December as are the new revenue standards, AASB 15 and AASB 1058 for Not-for-Profit entities but what about the other new standards and pronouncements?
The table below shows the new pronouncements effective for 31 December, they have been separated into those new standards for all entities and those ones which are only new for not-for-profit entities (due to the deferral of AASB 15, all standards that referred to AASB 15 were also deferred).
New standards effective at 31 December 2019
|For ALL entities
||Not-for-profit entities ONLY
|AASB 16 Leases
||AASB 15 Revenue from Contracts with Customers
|AASB 2017-6 Amendments to Australian Accounting Standards — Prepayment Features with Negative Compensation
||AASB 1058 Income of Not-For-Profit Entities
|AASB 2017-7 Amendments to Australian Accounting Standards — Long-term Interests in Associates and Joint Ventures
||AASB 2017-1 Amendments to Australian Accounting Standards — Transfers of Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments (AASB 1. AASB 128 AASB 140)
|AASB 2018-1 Amendments to Australian Accounting Standards — Annual Improvements Cycle 2015-2017 Cycle
||AASB 2018-4 Amendments to Australian Accounting Standards — Australian Implementation Guidance for Not-for-Profit Public Sector Licensors
|AASB 2018-2 Amendments to Australian Accounting Standards — Plan Amendment, Curtailment or Settlement [AASB 119]
||AASB 2018-8 Amendments to Australian Accounting Standards — Right of Use Assets of Not-for-Profit Entities
|AASB 2018-3 Amendments to Australian Accounting Standards — Reduced Disclosure Requirements
||Interpretation 22 Foreign Currency Transactions and Advance Consideration
|Interpretation 23 Uncertainty over Income Tax Treatments
We have provided more information below on Interpretation 23, however we believe that the rest of these changes (apart from the revenue and leases changes) are minor and narrow scope, if you do believe your entity may be affected please contact your Bentleys adviser for further information.
Tax uncertainty — don’t forget Interpretation 23
Interpretation 23 Uncertainty over Tax Treatments has slipped under the radar as most finance professionals’ attention has been focussed on the revenue and leases changes, however this Interpretation could have significant consequences for entities.
This interpretation refers to where the tax treatment adopted for a particular transaction may be uncertain until the relevant tax authority has made a decision in the future.
Interpretation 23 clarifies the requirement where this uncertainty exists as follows:
- The entity considers whether it is probable that a taxation authority will accept an uncertain tax treatment with full knowledge of all facts and circumstances.
- If an entity concludes it is probable that the taxation authority will accept an uncertain tax treatment, the entity shall determine the taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment used or planned to be used in its income tax filings. An entity shall determine whether disclosure as a tax related contingency is required.
- If an entity concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the entity shall reflect the effect of uncertainty in determining the related taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates. An entity shall reflect the effect of uncertainty for each uncertain tax treatment by using either the most likely amount or the expected value.
The judgements, assumptions and uncertainties around the uncertain tax treatment is required to be disclosed.
AASB issues FAQs on research grants
The AASB staff have updated their FAQ’s on revenue recognition relating to research grants, in particular whether a transfer of goods or services has occurred and how the revenue in relation to these agreements should be recognised.
Deferral of AASB 15 / 1058 for research income
At the AASB meeting on 21 November, the Board agreed to an optional deferral of AASB 15 / 1058 for entities with a reporting date of between 31 December 2019 and 29 June 2020 who have research income.
Update on Australian Financial Reporting Framework project
The AASB are continuing their project to provide some certainty around the Financial Reporting Framework, as reported in previous editions, the focus of the Board is currently on for-profit entities with the not-for-profit project following in later years.
The AASB have two exposure drafts out for comment until 28 November 2019:
- ED 295 General Purpose Financial Statements–Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities
- ED 297 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities
In relation to the impact on entities of these exposure drafts and other changes which are agreed, we have reflected the impact in the diagram below depending on the type of entity.
Large Pty Ltd
|Other for-profit entities
Not for profit entities
|Prepare general purpose financial statements from 30 June 2020.
||If meet certain criteria, then general purpose financial statements from 30 June 2021.
||RDR financials — disclosure impact from 30 June 2021
Special purpose — extra AASB 1054 disclosures from 30 June 2020. Watch for changes to reporting framework.
To provide more detail ED 297 proposes that FOR-PROFIT PRIVATE SECTOR entities should prepare general purpose financial statements where either of the following conditions are met:
|Required by legislation to comply with Accounting Standards / Australian Accounting Standards.
Required by other documents to comply with Australian Accounting Standards, where that document was issued / amended after 1 July 2020.
Whereas ED 295 sets out a proposal for a revised Tier 2 of general purpose financial statements known as the ‘simplified disclosure requirements’ – this proposed tier will require entities to comply with all recognition and measurement requirements, consolidation and equity accounting and most presentation requirements. The disclosures are based on the requirements in IFRS for SME and will be set out in one standard rather than throughout the current accounting standards.
The AASB are proposing transition relief for entities who will need to change their recognition and measurement requirements if they were not fully compliant in their special purpose financial statements. The transition relief option would require the following primary statements rather than a full restatement.
30 June 2021 year end
31 December 2020 year end
|Notes to the financials
- Balance sheet is based on most recent SPFS
- Describe main adjustments required on transition for balance sheet and income statement (not required to quantify).
Note that the income statement comparatives are prepared on ‘old’ basis and therefore there is a lack of comparability.
Entities can choose to apply AASB 108 and the full retrospective method if they choose not to use the transition relief.
Other changes relating to this project:
- A statement that recognition and measurement requirements in the accounting standards have been complied with; OR
- A statement to disclose that the recognition and measurement requirements have not been complied with; OR
- A statement that the entity has not assessed whether the recognition and measurement requirements of the standard have been complied with.
This standard does not change any requirements for NFP’s but just requires more transparent disclosures of what the entity currently complies with (to the extent known).
If you have not completed your assessment of the impact of any of the standards above, then please speak to your Bentleys contact.