New accounting standards for 31 December 2022
Your team at Bentleys are delighted to provide you with an update on current issues in the financial reporting space, including new accounting standards.
Standard effective for the first time at 31 December 2022
There is one substantive standard which is mandatorily effective for the first time at 31 December which arose due to the annual improvements project and relates primarily to clarifications and editorials to a number of standards as shown in the table below:
| STANDARD | OVERVIEW OF CHANGES |
|---|---|
| AASB 1 First Time Adoption of Australian Accounting Standards | Simplifies the application of AASB 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences. |
| AASB 3 Business Combinations | Updates a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations. |
| AASB 9 Financial Instruments | Clarifies the fees an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. |
| AASB 116 Property, Plant and Equipment | Requires an entity to recognise the sales proceeds from selling items produced while preparing property, plant and equipment for its intended use and the related cost in profit or loss, instead of deducting the amounts received from the cost of the asset. |
| AASB 137 Provisions, Contingent Liabilities and Contingent Assets | Specifies the costs that an entity includes when assessing whether a contract will be loss-making. |
| AASB 141 Agriculture | Removes the requirement to exclude cash flows from taxation when measuring fair value, thereby aligning the fair value measurement requirements in AASB 141 with those in other Australian Accounting Standards. |
Standard effective for the first time at 30 June 2022 – did you miss it?
In June 2022, the AASB issued AASB 2022-4 Amendments to Australian Accounting Standards – Disclosures in Special Purpose Financial Statements of Certain For-Profit Private Sector Entities which introduces new disclosures for some special purpose financial statements as illustrated below.
If a for-profit entity is preparing special purpose financial statements under the following scenario:
then the following disclosures are required in those financial statements:
Something for your radar…
Classification of liabilities as current and non-current has been an issue in Australia for a number of years since many Australian banks have included an annual review clause in the bank agreements which has generally caused most bank loans to be classified as current.
The International Accounting Standard Board made some changes to the definition of a current liability in 2020, however there have been ongoing discussions about the consequence of those changes since that date. This has resulted in the IASB issuing an amending standard on this topic prior to the effective date of the first standard.
At the time of writing (November 2022), the AASB has not issued this standard in Australia, however it is expected to be approved by the Board in December.
The effective date of the amending standard is annual reporting periods beginning on or after 1 January 2024, however the amending standard contains some significant changes to the classification principles which could mean that some entities want to early adopt this standard for their next reporting period.
The amending standard essentially requires an entity to consider whether they have complied with any long-term loan covenants which relate to conditions existing at the reporting period, and if they have, then they are considered to have a right to defer the settlement for at least 12 months.
For assistance with your financial reporting requirements, contact your local Bentleys audit and assurance advisor. We’re here to help you get where you want to be.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.