A S S U R A N C E & A DV I S O RY

Summary of Australian Accounting

Requirements

April 2003
Our culture – our essence
Culture at Deloitte does not just happen – we work at it.
It’s the sum total of the actions of our people, it’s the way we treat others – it’s the way we
behave.
Our seven Signals embody these values. Our passion for teamwork and exceptional client
service is our point of difference.
At Deloitte, we live and breathe our culture.

Deloitte Touche Tohmatsu is one of the world’s leading professional services organisations.
The member firms of Deloitte Touche Tohmatsu deliver world-class assurance and advisory,
tax, and consulting services. With more than 119,000 people in over 140 countries, the
member firms serve over one-half of the world’s largest companies, as well as large national
enterprises, public institutions, and successful, fast growing global growth companies.

Our internationally experienced professionals strive to deliver seamless, consistent services

wherever our clients operate. Our mission is to help our clients and our people excel.

Deloitte’s Australian practice had a net revenue of $573 million in the year ending 2002.

Awards & achievements – Australian practice

Offices that form the Australian practice are: Adelaide, Alice Springs, Brisbane, Canberra,
Darwin, Hobart, Katherine, Launceston, Melbourne, Parramatta, Perth, Sydney, with Kimbe,
Lae, Madane & Port Moresby in Papua New Guinea (known as Deloitte Touche Tohmatsu),
Hong Kong, Kuala Lumpur, Manila, Seoul, Shanghai, Singapore, Taipei (known as
Trowbridge Deloitte) Tokyo (known as Deloitte Tohmatsu AICG).

21 offices around Australia & Asia with 250 partners and a team of over 2160
voted #1 in Euromoney’s ‘World’s Leading Tax Advisers’ guide (2002)
ranked #2 overall in the 2002 International Tax Review survey
ranked #2 in annual list of ‘Top 100 accounting firms’, by BRW (2002)
top tier accounting and business consulting recruitment firm, Professional
Recruitment Profiles (2002)
‘Employer of Choice for Women’ citation for 2002 (and 2001) by the EOWA (Equal
Opportunity for Women in the Workplace Agency) Business Achievement Awards.

3
Summary of Australian
Accounting Requirements
Contents Page

Part One – Differential Reporting..........................................................................................................................5

Part Two – Corporations Act 2001 .......................................................................................................................13

Part Three – Accounting Standards Issued By The AASB................................................................................22

Part Four – Australian Accounting Standards (AAS) ........................................................................................84

Part Five – Urgent Issues Group Consensus Views ..........................................................................................91

Part Six – Statements of Accounting Concepts ................................................................................................120

Part Seven – Accounting Exposure Drafts ........................................................................................................124

Part Eight – Accounting Guidance Releases .....................................................................................................125

Part Nine – ASIC Class Orders ..........................................................................................................................127

Part Ten – ASIC Practice Notes .........................................................................................................................129

Part Eleven – ASX Listing Rules ........................................................................................................................130

Part Twelve – International Accounting Standards ..........................................................................................132

4
Part 1 – Differential reporting

The reporting entity concept • Federal, State and Territorial governments;

• local governments; and
The reporting entity concept was adopted by the
accounting profession in June 1992 in an attempt to • a company which is not a controlled entity of a
reduce the reporting requirements imposed on holding company incorporated in Australia and
certain entities by the application of Accounting which is a controlled entity of a foreign company
Standards. Under this concept, “reporting entities” where that foreign company has its securities
are required to prepare a financial report in listed for quotation on a stock market or those
compliance with all Accounting Standards and securities are traded on the stock market.
Urgent Issues Group Consensus Views (referred to Examples of entities which are often not reporting
as general purpose financial reports (GPFRs)). entities are:
“Non-reporting entities”, however, have the option
to prepare special purpose financial reports (SPFRs) • privately-owned trusts;
in compliance with those Accounting Standards and • partnerships;
Urgent Issues Group Consensus Views considered • sole traders; and
necessary to enable the financial reports to meet the
• wholly-owned controlled entities of Australian
special purpose needs of the users. reporting entities.
For more information on the reporting entity
Identification of reporting entities
concept and GPFRs, refer to the following
A “reporting entity” means an entity in respect of Statements issued by the Australian accounting
which it is reasonable to expect the existence of bodies, or contact your nearest Deloitte Touche
users dependent on GPFRs for information which Tohmatsu office:
will be useful to them for making and evaluating
decisions about the allocation of scarce resources. • Miscellaneous Practice Statement APS 1
The classification of an entity as a reporting entity is “Conformity with Accounting Standards and UIG
linked to the information needs of the users. In Consensus Views”;
most instances it will be readily apparent whether • Statement of Accounting Concepts SAC 1
users dependent upon GPFRs exist. “Definition of the Reporting Entity”;
• Statement of Accounting Concepts SAC 2
Examples of entities which will always be
“Objective of General Purpose Financial
reporting entities are: Reporting”; and
• listed corporations; • Statement of Accounting Concepts SAC 3
• listed trusts; “Qualitative Characteristics of Financial
Information”
• other trusts which raise funds from the public;
• government-controlled business undertakings;
• government departments;

5
In an information release issued in July 2000, the Minimum compliance requirements
Australian Securities and Investments Commission
The following Accounting Standards and UIG
(ASIC) stated that it believed the existence of a
Consensus Views apply to all companies required to
significant number of creditors and/or employees
comply with Chapter 2M of the Corporations Act
may indicate that users exist who cannot command
2001, irrespective of whether they are reporting
the preparation of reports tailored so as to satisfy
entities or not:
specifically all of their information needs, and
therefore that the company is a reporting entity. • AASB 1018 “Statement of Financial Performance”;
ASIC indicated that it will look closely at cases • AASB 1034 “Financial Report Presentation and
where companies are treated as non-reporting Disclosures”;
entities, and will seek explanations from directors • AASB 1040 “Statement of Financial Position”; and
where it appears reasonable to expect that there • UIG Abstract 35 “Disclosure of Contingent
may be users dependant on GPFRs. Liabilities”.

Preparing SPFRs under the Corporations Statement of Cash Flows

Act 2001 A statement of cash flows is required to be included
in a SPFR prepared in accordance with Chapter 2M
General of the Corporations Act 2001. In accordance with the
reporting entity concept, the disclosure requirements
SPFRs prepared for a financial year must include:
of Accounting Standard AASB 1026 “Statements of
• financial statements for the period, comprising a Cash Flows”, including the notes to the statement of
statement of financial performance, statement of cash flows, need only be complied with to the extent
financial position and statement of cash flows; necessary to meet the information needs of the
• notes to the financial statements, as required by special purpose users, preparers of the SPFR must
the Corporations Regulations 2001 and ensure that the statement of cash flows includes a
Accounting Standards; and sufficient level of detail to present a true and fair
• a directors’ declaration. view of the performance of the entity. The ASIC has
expressed the view in ASIC-PN 68 that a statement
APS 1 “Conformity with Accounting Standards of cash flows should be presented in the AASB 1026
and UIG Consensus Views” paragraph 20, format. However, the SPFR may exclude some of the
indicates that members of the Australian detailed disclosure requirements of AASB 1026, for
accounting bodies who are involved in, or are example the requirements concerning:
responsible for, the preparation, presentation or
• non-cash transactions;
audit of a SPFR (except where it is reasonable to
• credit standby arrangements and used and unused
expect that the SPFR will be used solely for
loan facilities; and
internal purposes, for example monthly
management accounts) are to take all reasonable • acquisitions and disposals of entities, if
consolidated financial statements are not prepared.
steps within their power to ensure that the SPFR
and any audit report or accountant’s statement Where an entity has no cash flows during the current
states: and preceding reporting period, the entity should still
includes a statement of cash flows in its financial
• that it is a SPFR; report in order to comply with Chapter 2M of the
• the special purpose for which the SPFR has been Corporations Act 2001. The statement of cash flows
prepared; and in this instance would disclose nil balances for each
class of cash flow (that is, net cash flows from
• the extent to which Accounting Standards and
operating, investing and financing activities).
UIG Consensus Views have, or have not, been
adopted in its preparation and presentation.

6
Recognition and Measurement Requirements • entities and registered schemes which offer
securities other than debentures as consideration
In its July 2000 information release, the ASIC for an acquisition of shares in a target company
noted that the Accounting Standards provide a under a takeover scheme; and
framework for determining a consistent
• entities whose securities are issued under a
definition of “financial position” and “profit or compromise or scheme of arrangement.
loss”. Without such a framework the figures in
The following entities are exempt, from the
financial statements would lose their meaning.
enhanced disclosure requirements of the
Financial reports prepared under the
Corporations Act 2001:
Corporations Act 2001 must be prepared within
the framework of Accounting Standards to ensure • a public authority of a State or Territory or an
that the following requirements of the instrumentality or agency of the Crown in right
Corporations Act 2001 are met: of a State or Territory;
• a public authority of the Commonwealth or an
• the financial report gives a true and fair view
instrumentality or agency of the Crown in right
(s.297);
of the Commonwealth, the relevant traded debt
• the financial report does not contain false or securities of which are guaranteed by the
misleading information (s.1308); and Government of the Commonwealth; and
• dividends are only paid out of profits (s.254T). • an entity exempted by the Regulations or the
Therefore the recognition and measurement ASIC.
requirements of all Accounting Standards must Disclosing entities are required, inter alia, to
be applied in order to determine profit or loss comply with:
and financial position. The recognition and
1 The continuous disclosure requirements, which
measurement requirements of Accounting
include:
Standards include requirements relating to
• a requirement to provide information which,
depreciation of non-current assets, amortisation
if generally available, would be likely to have
of goodwill, tax-effect accounting, lease a material effect on the price or value of the
accounting, measurement of inventories, entity’s securities. Listed disclosing entities
recognition and measurement of liabilities for must immediately make such disclosure to the
employee benefits. In addition, those Accounting ASX, while unlisted disclosing entities must
Standards which deal with the classification of make such disclosure to the ASIC as soon as
items must be applied, for example the provisions practicable; and
of AASB 1033 “Presentation and Disclosure of • a requirement to give the ASX the information
Financial Instruments” concerning the needed to correct or prevent a false market in
an entity’s securities where the ASX considers
classification of financial instruments as debt or
that there is or is likely to be a false market
equity.
and asks the entity to give it information to
correct or prevent a false market.
Disclosing Entities
2 The half-year reporting requirements, which
The Corporate Law Reform Act 1994 introduced include a requirement to prepare a half-year
enhanced disclosure requirements for disclosing financial report, including:
entities, which include: • directors’ report and directors’ declaration, in
accordance with Part 2M.3 of the Corporations
• listed entities and listed registered schemes; Act 2001; and
• entities and registered schemes which raise • half-year financial statements, in accordance
funds pursuant to a prospectus; with AASB 1029 “Interim Financial
Reporting”.

7
 The half-year financial report must be lodged Definition
with the ASIC (or the ASX for listed disclosing
A proprietary company is a large proprietary
entities) within 75 days of the half-year end.
company for a financial year if it satisfies at least 2
However, the ASX recently revised its Listing
Rules, including those relating to reporting of the following conditions:
deadlines for half-year financial reports of listed a the consolidated gross operating revenue for the
disclosing entities. The revised ASX Listing Rules financial year of the company and the entities it
relating to half-year reporting deadlines will be controls (if any) is $10 million or more;
operative for half-years ending on or after 30 June
b the value of the consolidated gross assets at the
2003 and requires entities to lodge their half-year
end of the financial year of the company and the
report with the ASX within two months of the
entities it controls (if any) is $5 million or more;
half-year end. A summary of the revised
or
reporting deadlines are provided on page 20. The
half-year report, prepared in accordance with c the company and the entities it controls (if any)
AASB 1029 must be lodged together with the have 50 or more employees at the end of the
information required by the newly developed financial year.
Appendix 4D to the Listing Rules. Section 45A of the Corporations Act 2001 requires that when counting employees,
part-time employees be taken into account as an appropriate fraction of a full-time
3 The annual reporting requirements, which equivalent. Consolidated gross operating revenue and the value of consolidated gross
require disclosing entities to prepare a financial assets are to be calculated in accordance with the basis of accounting specified by
report for the financial year in accordance with accounting standards in force at the relevant time.
Part 2M.3 of the Corporations Act 2001. The
annual financial report must be lodged with the Lodgement Relief
ASIC (or the ASX for listed disclosing entities)
within 3 months of the financial year end. In accordance with the former s.319(4) of the
Corporations Law which continues to apply in
The annual financial report of disclosing entities
accordance with s.1408(6) of the Corporations
that are not companies must be prepared in
Act 2001, (ie. the “Grandfather Clause”) large
accordance with AASB accounting standards.
proprietary companies that were classified as
This requirement applies to financial years
commencing on or after 1 July 1994 through the “exempt proprietary companies” as at 30 June 1994
application of AASB 1030 “Application of and continue to meet the definition of “exempt
Accounting Standards to Financial Year Accounts proprietary company” at all times subsequent to
and Consolidated Accounts of Disclosing Entities 30 June 1994 are relieved from the requirement to
Other than Companies”. lodge a financial report with the ASIC, provided
certain conditions are satisfied.

Large Proprietary Companies ASIC Class Order 98/0099 (dated 10 July 1998),
provides similar lodgement relief to large
proprietary companies in which an ownership
Preparation of Financial Reports
interest is held by a foreign company, provided the
Large proprietary companies (as defined below) are ownership interest does not constitute control and
required to prepare a financial report in accordance certain other conditions are satisfied. To take
with Part 2M.3 of the Corporations Act 2001 and advantage of this relief, the directors of the large
have the financial report audited. proprietary company must lodge with the ASIC,
within 4 months after the end of the first financial
year that ends after 24 April 1997, notification of
their intention to adopt the ASIC Class Order.

8
Audit Relief • management accounts, incorporating a
statement of financial performance, statement
ASIC Class Order 98/1417 (dated 13 August 1998)
of financial position and statement of cash
relieves large proprietary companies that were not
flows, must be prepared on at least a quarterly
audited for a financial year ending during 1993, or
basis within one month after the end of the
in any later financial year, from the audit relevant quarter;
requirements of the Corporations Act 2001
provided certain conditions are satisfied. • total liabilities must not exceed 70% of total
tangible assets (determined in accordance with
The relief does not apply to large proprietary the basis of accounting specified by
companies that are: Accounting Standards and UIG Consensus
Views, except that liabilities may exclude
• large “grandfathered” proprietary companies Approved Subordinated Debt);
under the former s.319(4) of the Corporations
Law; • the company, and economic entity where
consolidated financial statements are required
• disclosing entities; under the Corporations Act 2001, must have
• borrowers in relation to debentures; made a profit from ordinary activities after
• guarantors of borrowers in relation to related income tax expense for the Relevant
debentures; or Financial Year or the financial year preceding
the Relevant Financial Year;
• a licensed securities dealer or a futures broker.
• where the company is party to a deed of cross
The Class Order relieves large proprietary
guarantee for the purposes of relief to its
companies from the audit requirements of the wholly-owned controlled entities under ASIC
Corporations Act 2001 for any financial year ending Class Order 98/1418 the previous two
on or after 1 July 1998 (defined as the ”Relevant conditions must also be satisfied for the closed
Financial Year”) provided certain conditions are group and those entities which are parties to
satisfied. the deed of cross guarantee; and
To qualify for audit relief the following conditions • the year end financial statements must be
must be satisfied: prepared by a prescribed accountant (which may
be an employee of the company) in accordance
• during the period of three months before the with Miscellaneous Professional Statement APS
commencement of the Relevant Financial Year 9 “Statement on Compilation of Financial
and ending one month after the Reports” and must be accompanied by a
commencement of the financial year, all compilation report prepared in accordance with
directors and all shareholders must resolve APS 9.
that an audit is not required and formal
notification of the resolution must be lodged In addition, the company must comply with the
with the ASIC (using Form 382); following requirements:

• written notice that an audit is required has not • where a shareholder requests a copy of the
been received; management accounts or a directors’
• the directors’ declaration for each financial resolution regarding the above items, the
year ending on or after 1 July 1998 must company must make these available to the
include an unqualified statement that there shareholder;
are reasonable grounds to believe that the • the company must lodge its financial report
company will be able to pay its debts as and and directors’ report with the ASIC in
when they become due and payable; accordance with the requirements of the
• the company must have procedures which Corporations Act 2001; and
enable all the directors to assess whether the • the directors’ report must include a statement
company is able to pay its debt as and when that the financial statements have not been
they fall due; audited, in reliance on this Class Order, and
that the requirements of this Class Order have
been complied with.

9
Small Proprietary Companies Relief for Foreign Controlled Small
Proprietaries Companies
Preparation of Financial Reports
Financial Report Preparation, Audit and
A small proprietary company (as defined below) is
Lodgement Relief
not required to prepare a financial report under
Chapter 2M.3 of the Corporations Act 2001 unless: ASIC Class Order 98/0098 (dated 10 July 1998)
provides relief to foreign controlled small
• the small proprietary company is controlled by proprietary companies that are not part of a “large
a foreign company (for all or part of the year) group” from the requirement to prepare, audit and
and the results of the small proprietary lodge a financial report under Part 2M.3 of the
company for the year (or part thereof, if control Corporations Act 2001 (other than as required by a
existed for only part of the year) are not shareholders’ request or an ASIC request) provided
covered by consolidated financial statements certain conditions are satisfied.
lodged with the ASIC by the registered foreign A “group” is a “large group” when, on a combined
company or by an intermediate Australian basis, the “group” satisfies at least 2 of the
holding company; following conditions for the financial year of the
• 5% or more of the shareholders request that a company in question:
financial report be prepared; or • the combined gross operating revenue of the
• the ASIC requests that a financial report be group for the financial year is $10 million or
prepared. more;
If 5% or more of the shareholders request that a financial report be prepared, a • the combined value of the gross assets of the
directors’ report need not be prepared and the financial report need not be prepared
group at the end of the financial year is $5
in accordance with Accounting Standards if the shareholders’ request specifies that a
directors’ report is not required and that Accounting Standards need not be complied million or more;
with. In addition, the financial report need only be audited if the shareholders’ • the group has 50 or more employees at the end
request asks for the financial report to be audited.
of the financial year.
If the ASIC request that a financial report be prepared, the financial report is to be
prepared in accordance with the request (ie. the request may or may not require that
Where “group” is defined to comprise:
the financial report be prepared in accordance with Accounting Standards or be • the company in question;
subject to an audit).
• any entity which controlled the company and
which was incorporated or formed in Australia,
Definition or carries on business in Australia;
A proprietary company is a small proprietary • any other entities (“the other entities”) controlled
company for a financial year if it satisfies at least 2 by any foreign company which controls the
of the following conditions: company in question, which are incorporated or
formed in Australia or carry on business in
a the consolidated gross operating revenue for the
Australia; and
financial year of the company and the entities it
controls (if any) is less than $10 million; • any entities which are controlled by the company
in question or the other entities (these entities
b the value of the consolidated gross assets at the
can be Australian or foreign entities).
end of the financial year of the company and the
Combining financial statements is a process similar to consolidation except that it
entities it controls (if any) is less than $5
only includes the entities which fall within the definition of “group”.
million; or
To take advantage of this relief, the directors must
c the company and the entities it controls (if any)
have fewer than 50 employees at the end of the resolve to adopt the ASIC Class Order and lodge
financial year. formal notification with the ASIC (using Form
384) prior to the commencement of each financial
Section 45A of the Corporations Act 2001 requires that when counting employees,
part-time employees be taken into account as an appropriate fraction of a full-time year.
equivalent. Consolidated gross operating revenue and the value of consolidated gross
assets are to be calculated in accordance with the basis of accounting specified by
accounting standards in force at the relevant time.

10
Audit Relief e the company and every other entity (if any) in
the closed group is party to a deed of cross
ASIC Class Order 98/1417 provides relief to
guarantee, an original of which has been lodged
foreign controlled small proprietary companies,
with the ASIC, which is valid at the balance date
that were not audited in 1993 or any subsequent and the holding entity’s deadline;
financial year except for a financial year which
f in relation to the last 3 financial years before
ended after 9 December 1995 and before 24 April
taking advantage of the relief and since taking
1997, from the audit requirements of the
advantage of the relief, the entity and the auditor
Corporations Act 2001 provided certain conditions
of the entity have substantially satisfied all of
are satisfied. The Class Order relieves foreign
their statutory obligations in relation to Chapter
controlled small proprietary companies from the
2M and 2N of the Corporations Act 2001
audit requirements of the Corporations Act 2001 (previously Parts 3.6 and 3.7 of the Corporations
for any financial year ending on or after 1 July 1998 Law);
(defined as the “Relevant Financial Year”) provided
g the directors, of the company and each other
certain conditions are satisfied, refer large
entity that is a party to the deed of cross
proprietary companies – audit relief.
guarantee, sign and lodge with the ASIC a
statement, that immediately prior to the
execution of the deed of cross guarantee, there
Wholly-Owned Subsidiaries
were reasonable grounds to believe that each
entity would be able to pay its debts as and when
Directors’ Report they fall due;
All wholly-owned subsidiaries of companies h the directors of the company have resolved that
incorporated in Australia need not include the the company should obtain the benefit of this
information required by s.300(10) of the Class Order;
Corporations Act 2001 in the directors report. i the company has provided the ASIC with
evidence that the company is entitled to the
Financial Report Preparation, Lodgement benefit of this Class Order (or a previous Class
and Audit Relief Order); and
j the company has paid the necessary fee to the
ASIC Class Order 98/1418 (dated 13 August 1998)
ASIC.
exempts wholly-owned subsidiaries from the
requirement to prepare a financial report, where The main conditions of the Class Order are:
their parent entity prepares consolidated financial a the parent entity prepares consolidated financial
statements. The relief extends to the auditors’ and statements which include additional information
directors’ report, and to the distribution and in relation to the deed of cross guarantee and
lodgement of the financial report. depending on the entities consolidated, include
in a note to the financial statements a detailed
The relief is only available where: statement of financial position and statement of
a the holding entity of the company has a financial financial performance, opening and closing
year which ends on the same date as the retained profits, dividends provided for or paid,
financial year of the company; and transfers to and from reserves, of certain
groups of entities in or out of the closed group;
b the company is a public company, large
proprietary company or a foreign controlled b the directors of the holding entity sign and lodge
small proprietary company to which s.292(2)(b) a statement, within 4 months of year end, that
applies; there are reasonable grounds to believe that the
extended closed group will be able to meet any
c the company is not a borrower in relation to obligations or liabilities to which they are, or
debentures, disclosing entity, licensed securities may become, subject by virtue of the deed of
dealer or a futures broker; cross guarantee. This condition is usually
d the holding entity of the company is not a small satisfied by including the statement in the
proprietary company; directors’ declaration of the holding entity’s
financial report; and

11
c the directors sign and lodge a notice, within 4
months of year end, containing (using Form
389):
i a statement that the directors have taken
advantage of the relief under this Class Order;
ii a short statement of the nature of the deed of
cross guarantee;
iii a list of the holding entity and the parties to
the deed of cross guarantee, separately
identifying the members of the wholly-owned
group and the other members of the extended
closed group;
iv details of parties added or removed from the
deed of cross guarantee, or are subject to a
Notice of Disposal; and
v a statement that at or about the time of the
company’s reporting date the directors
reassessed the advantages and disadvantages
associated with the company remaining a
party to the deed of cross guarantee and
taking advantage of the relief and the
directors resolved either that the company
should continue to remain a party to the deed
of cross guarantee, or seek to revoke the deed
of cross guarantee, as the case may be.

12
 Part 2 – Corporations Act 2001

Preparation of an Annual Financial Report

The following flowchart assists in determining whether an entity is required to Annual Financial Report
prepare an annual financial report under Part 2M.3 of the Corporations Act 2001. under Part 2M.3 of the
Corporations Act 2001
yes Required Not Required
Disclosing Entity ✓
no
yes
Registered Scheme ✓
no
yes
Has the ASIC granted relief from the requirement to
Public Company yes
prepare an annual financial report (eg. ASIC-CO ✓
no 98/1418)?
no
✓
Large Proprietary
yes Has the ASIC granted relief from the requirement to
Company yes
prepare an annual financial report (eg. ASIC-CO ✓
no 98/1418)?
no
Small Proprietary ✓
yes Was the small proprietary company controlled by a
Company
no foreign company for all or part of the year?
yes

Are the results of the foreign controlled small

proprietary company covered by consolidated
yes
financial statements lodged with the ASIC by the
foreign parent entity or by an intermediate Australian
parent entity (s.292(2)(b))?

no

Has the foreign controlled small proprietary company

yes been granted relief from the requirement to prepare no
✓
an annual financial report pursuant to ASIC-CO
98/0098?

Has the ASIC or 5% or more of shareholders requested the small proprietary yes
✓
company to prepare an annual financial report (s.293 and s.294)?
no
✓

13
Audit of the Annual Financial Report
Having determined that an entity is required to prepare an annual financial report under Part 2M.3 of the
Corporations Act 2001, the following flowchart assists in determining whether the annual financial report is
required to be audited under Part 2M.3 of the Corporations Act 2001.

Audit under Part 2M.3 of

the Corporations Act 2001
General Requirements Required Not Required
yes
Disclosing Entity ✓
no
yes
Registered Scheme ✓
no
yes
Public Company ✓
no

Large Proprietary yes Has the ASIC granted relief from the audit
yes
Company requirements of the Corporations Act 2001 (eg. ✓
no ASIC-CO 98/1417)?
Foreign Controlled no
✓
Small Proprietary
yes yes
Company Has the ASIC granted relief from the audit ✓
requirements of the Corporations Act 2001 (eg.
ASIC-CO 98/1417)?

no
✓

Small Proprietary Companies Subject to ASIC/Shareholder Request

Does the ASIC request or shareholder request require the annual financial report yes
✓
to be audited (s.293 and s.294)?
no
✓

14
Lodgement of the Annual Financial Report with the ASIC
Having determined that an entity is required to prepare an annual financial report under Part 2M.3 of the
Corporations Act 2001, the following flowchart assists in determining whether the annual financial report is
required to be lodged with the ASIC.

Lodge Annual Financial

Report with the ASIC
General Requirements Required Not Required
yes
Disclosing Entity ✓
no
yes
Registered Scheme ✓
no
yes
Public Company ✓
no
Has the company been granted relief from the
Large Proprietary yes requirement to lodge an annual financial report
yes
Company with the ASIC pursuant to the “grandfathering” ✓
no provisions of s.319(4) * or ASIC-CO 98/0099?

Foreign Controlled no
✓
Small Proprietary
yes
Company ✓

Small Proprietary Companies Subject to ASIC Request

Does the ASIC request require the small proprietary company to lodge a copy of yes
✓
the annual financial report (s.294)?
no
✓

* In accordance with the “grandfathering” provisions of the former s.319(4) of the Corporations Law, which
continues to apply in accordance with s.1408(6) of the Corporations Act 2001, a large proprietary company is
not required to lodge an annual financial report with the ASIC provided:
• the company was an exempt proprietary company on 30 June 1994;
• the company continues to meet the definition of “exempt proprietary company” (as in force at 30 June 1994)
at all times since 30 June 1994;
• the company was a large proprietary company at the end of the first financial year after 9 December 1995;
• the company’s financial statements for the financial year ending during 1993 and each later financial year
have been audited before the deadline; and
• within 4 months after the end of the first financial year after 9 December 1995, the company lodged with the
ASIC (using Form 373) a notice that the company has applied the lodgement relief granted by s.319(4).

15
Format of an Annual Financial • if the entity’s operations are subject to any
particular and significant environmental
Report regulation under a law of the Commonwealth
An annual financial report prepared to satisfy the or of a State or Territory–details of the entity’s
requirements of Part 2M.3 of the Corporations Act performance in relation to environmental
2001 must include: regulation;
• dividends or distributions paid to members
• financial statements for the period, comprising a
during the year;
statement of financial performance, statement of
financial position and statement of cash flows; • dividends or distributions recommended or
declared for payment to members, but not
• notes to the financial statements, as required by paid, during the year;
the regulations and Accounting Standards; and
• the name of each person who has been a
• a directors’ declaration. director of the company, registered scheme or
Part 2M.3 of the Corporations Act 2001 also disclosing entity at any time during or since
requires a directors’ report to be prepared and the end of the year and the period for which
attached the annual financial report of the entity. they were a director;
• options that are:
Directors’ Report – granted over unissued shares or unissued
interests during or since the end of the
The directors’ report for a financial year must year; and
contain (pursuant to sections 299, 300 and 300A,
– granted to any of the directors or any of the
except where otherwise stated):
5 most highly remunerated officers of the
a All companies: company; and
• a review of operations and the results of those – granted to them as part of their
operations; remuneration;
• details of any significant changes in the • unissued shares or interests under option as
entity’s state of affairs during the year; at the day the report is made;
• details of the entity’s principal activities • shares or interests issued during or since the
during the year and any significant changes end of the year as a result of the exercise of
in the nature of those activities during the an option over unissued shares or interests;
year; • details of indemnities given and insurance
• details of any matter or circumstance that has premiums paid during or since the end of the
arisen since the end of the year that has year for a person who is or has been an
significantly affected, or may significantly officer or auditor;
affect: • details of any application for leave under
– the entity’s operations in future financial section 237 of the Corporations Act 2001
years; or made in respect of the company, including
– the results of those operations in future the applicant’s name and a statement whether
financial years; or leave was granted; and

– the entity’s state of affairs in future • details of any proceedings that a person has
financial years; brought or intervened in on behalf of the
company with leave under section 237 of the
• details of likely developments in the entity’s
Corporations Act 2001, including the person’s
operations in future financial years and the
name, the names of the parties to the
expected results of those operations;
proceedings, and sufficient information to
enable members to understand the nature
and status of the proceedings (including the
cause of action and any orders made by the
court).

16
b Public companies that are not a wholly-owned d Listed registered schemes, in respect of each
subsidiaries of another company or of a director of the company that is the responsible
recognised company, in respect of each director: entity for the scheme:
• qualifications, experience and special • their relevant interests in interests in the
responsibilities; scheme;
• number of meetings of the board of directors • their rights or options over interests in the
held during the year and each director’s scheme; and
attendance at those meetings; and • contracts to which the director is a party or
• number of meetings of each board committee under which the director is entitled to a
held during the year and each director’s benefit and that confer a right to call for or
attendance at those meetings. deliver interests in the scheme.
c Listed companies: e Registered schemes:
• discussion of the broad policy for • the fees paid to the responsible entity and its
determining the nature and amount of associates out of scheme property during the
emoluments of board members and senior financial year;
executives of the company; • the number of interests in the scheme held
• discussion of the relationship between such by the responsible entity or its associates as at
policy and the company’s performance; the end of the financial year;
• details of the nature and amount of each • interests in the scheme issued during the
element of the emolument of each director financial year;
and each of the 5 named officers of the • withdrawals from the scheme during the
company receiving the highest emolument; financial year;
and
• the value of the scheme’s assets as at the end
• in respect of each director: of the financial year, and the basis for the
– their relevant interests in shares of the valuation; and
company or a related body corporate; • the number of interests in the scheme as at
– their relevant interests in debentures of, or the end of the financial year.
interests in a registered scheme made The report must be signed by a director in
available by, the company or a related body accordance with a resolution of directors (s.298(2)).
corporate;
– their rights or options over shares in,
Directors’ Declaration
debentures of or interests in a registered
scheme made available by, the company or The financial report must include a statement (per
a related body corporate; and s.295(4)) by the directors declaring:
– contracts:
a the financial statements and notes thereto
- to which the director is a party or under comply with Accounting Standards;
which the director is entitled to a benefit;
b the financial statements and notes thereto give a
and
true and fair view of the financial position and
- that confer a right to call for or deliver performance of the company and the
shares in, or debentures of or interests in consolidated entity;
a registered scheme made available by
c in the directors’ opinion, the attached financial
the company or a related body corporate.
statements and notes thereto are in accordance
with the Corporations Act 2001; and
d in the directors’ opinion, there are reasonable
grounds to believe that the company will be able
to pay its debts as and when they become due
and payable.

17
Audit Report
Where an audit is required, an audit report must
be attached to the financial report (per s.301)
stating (per s.308) whether or not, in the auditor’s
opinion, the financial report is in accordance with:
a the Corporations Act 2001, including:
i giving a true and fair view of the company’s
and consolidated entity’s financial position
and of their performance; and
ii complying with Accounting Standards and
the Corporations Regulations 2001; and
b other mandatory professional reporting
requirements.

Financial Statements
The financial statements and notes to the financial
statements must give a true and fair view of the
company’s financial position and performance (per
s.297) and must comply with Australian
Accounting Standards (per s.296).

18
Reporting Deadlines
The following table summarises the reporting deadlines under the Corporations Act 2001 and ASX Listing
Rules (where relevant). For listed disclosing entities, the reporting deadlines provided below are only
applicable to half-years and financial ending before 30 June 2003.

Foreign
Controlled
Listed Non-Listed Large Small
Source Disclosing Disclosing Public Proprietary Proprietary Registered
Reference Requirement Entity** Entity Company Company Company Scheme

Half-Year Financial Report

ASX 4.1, Lodgement of the ASX As soon as N/A N/A N/A N/A N/A
ASX 4.1.1 half-year proforma available (and
report with the ASX no later than 75
(Appendix 4B) days after the
half-year end)

ASX 4.2, Lodgement of the As soon as N/A N/A N/A N/A N/A
ASX 4.2.1 Corporations Act 2001 available
half-year financial (and no later than
report with the ASX 75 days after
the half-year end)

s.320 Lodgement of the N/A Within 75 N/A N/A N/A N/A

Corporations Act 2001 (ASIC-CO 98 /0104) days after
half-year financial report the half-
with the ASIC year end

Annual Financial Report

ASX 4.3, Lodgement of the ASX As soon as N/A N/A N/A N/A N/A
ASX 4.3.1 preliminary final report available (and no
with the ASX later than 75 days
(Appendix 4B) after theyear end)

ASX 4.5 Lodgement of the As soon as N/A N/A N/A N/A N/A
Corporations Act 2001 available (and no
annual financial report later than 3
and concise report with months after
the ASX theyear end)

s.319 Lodgement of the N/A Within 3 Within 4 Within 4 Within 4 Within 3

Corporations Act 2001 (ASIC-CO98/0104) months months months months months
annual financial report after the after the after the after the after the
and concise report with year end year end year end year end year end
the ASIC

ASX 4.6, Distribution of the Within 17 weeks Earlier of 21 Earlier of 21 Within 4 Within 4 Within 3
ASX 4.7 Corporations Act after the year end days before days before months months months
ASX 4.7.1, 2001 annual financial (and no less than 21 the AGM or the AGM or after year after year after year
s.315 report or concise report days before the 4 months 4 months end end end
to the members AGM) after year end after year
end

Annual General Meetings

s.250N Hold the AGM Within 5 months Within 5 Within 5 N/A N/A N/A
after the year end months after months after
(if a public the year end the year end
company) (if a public (if more than
company) 1 member
company)

Annual Returns

s.345 Lodgement of the No later than No later than No later than No later than No later Within 3
annual return 31 January 31 January 31 January 31 January 31 January months
after the
year end

* Note, a wholly-owned public company is not required to hold an AGM under s.250N(4). 19
** Applicable for half-years and financial years ending before 30 June 2003.
Reporting Deadlines (continued)
The following table summarises the reporting deadlines for lodgement of half-year and annual financial
reports of listed disclosing entities under the Corporations Act 2001 and the revised ASX Listing Rules which
are operative for half-years and financial years ending on or after 30 June 2003. The deadlines relating to
annual general meetings and annual returns as disclosed on page 19 have not been amended by the revision
to the ASX Listing Rules.

Source Reference Requirement Reporting Deadlines

Half-Year Financial Reports (For half-years ending on or after 30 June 2003)

ASX 4.2A, ASX 4.2A.3, ASX Lodgement of Appendix 4D with the ASX As soon as available (no later than when half-year
4.2B (Appendix 4B no longer required) reports are lodged with ASIC and no later than 2
months after half-year end)

ASX 4.2A, ASX 4.2A, 1ASX Lodgement of the Corporations Act 2001 half- As soon as available (no later than when half-year
4.2B year financial report (prepared in accordance reports are lodged with ASIC and no later than 2
with AASB 1029 “Interim Financial Reporting” ) months after half-year end)
with the ASX

s.320 Lodgement of the Corporations Act 2001 half- N/A(ASIC-CO 98/0104)

year financial report with the ASIC

Annual Financial Report (For financial years ending on or after 30 June 2003)

ASX 4.3AASX 4.3B Lodgement of Appendix 4E with the ASX Financial years ending on or after 30 June 2003 but
(Appendix 4B no longer required) before 30 June 2004: As soon as available (and no
later than 75 days after year end.
Financial years ending on or after 30 June 2004:
As soon as available (and no later than 2 months after
year end)

ASX 4.5 Lodgement of the Corporations Act 2001 As soon as available (and no later than 3 months after
annual financial report and concise report with the year end)
the ASX

s.319 Lodgement of the Corporations Act 2001 N/A(ASIC-CO 98/0104)

annual financial report and concise report with
the ASIC

ASX 4.6, ASX 4.7, ASX 4.7.1, Distribution of the Corporations Act 2001 Within 17 weeks after the year end (and no less than
s.315 annual financial report or concise report to the 21 days before the AGM)
members

20
Other Small Proprietary Companies Signing the Annual Financial Report and
With the exception of certain foreign controlled
Half-Year Financial Report
small proprietary companies (refer above), small The directors’ report and directors’ declaration
proprietary companies are not required to prepare must be prepared and signed off in time to comply
an annual financial report under the Corporations with the lodgement and distribution deadlines of
Act 2001, unless requested to do so by either: the Corporations Act 2001 (as detailed above).
a the ASIC; or The directors’ report and directors’ declaration
b the shareholders of the company. (made out in accordance with a directors’
resolution) need only be signed by one director, for
ASIC Request example, the chairman of the board. The Board of
Directors can however choose to have more than
In the event that a small proprietary company (not one director sign the directors’ report or directors’
otherwise required to prepare and lodge an annual declaration.
financial report under the Corporations Act 2001)
is requested by the ASIC to prepare and lodge an
annual financial report, the deadline for lodgement Notice of Members’ Meetings
with the ASIC is the date specified in the request In relation to proprietary companies and unlisted
(s.294). public companies, 21 days notice must be given for
all members’ meetings (unless a longer notice
Shareholders’ Request period is specified in the company’s constitution).
However, the Corporations Act 2001 makes
In the event that a small proprietary company (not provision for the members to agree to a shorter
otherwise required to prepare an annual financial notice period, other than notice periods for
report under the Corporations Act 2001) is members’ meetings in which a resolution will be
requested by the shareholders to prepare and moved to appoint or remove directors, or remove
distribute an annual financial report, the deadline the auditor of the company.
for the distribution is the later of (s.315(2)):
In relation to listed companies, 28 days notice
a 2 months after the date on which the request is must be given for all members’ meetings (unless a
made; or longer notice period is specified in the company’s
b 4 months after the end of the financial year. constitution).
Where a small proprietary company is required to
prepare an annual financial report in accordance
with a shareholders’ request, a directors’ report
need not be prepared and that financial report is
not required to be made out in accordance with
accounting standards where the shareholders’
request specifies that a directors’ report is not
required to be prepared and that accounting
standards need not be complied with. In addition,
the annual financial report is only required to be
audited where the shareholders’ request asks for an
audit to be performed.

21
Part Three – Accounting Standards
Issued by the AASB
Background Exceptions:

Approved Accounting Standards were issued by the • AASB 1018 – “Statement of Financial
Accounting Standards Review Board (ASRB) up to Performance” (Entities required to prepare a
31 December 1990. The ASRB was replaced by the financial report under Chapter 2M of the
Australian Accounting Standards Board (AASB) on Corporations Act 2001 in relation to half-years
1 January 1991, with the introduction of the ending on or after 31 December 2000 and
financial years ending on or after 30 June 2001).
Corporations Law (now Corporations Act 2001). As
a result of the Corporate Law Economic Review • AASB 1027 – “Earnings Per Share” (Entities
Program (CLERP) a new Board has been required to prepare general purpose financial
established, replacing the previously existing AASB reports under Part 2M.3 of the Corporations Act
and the Public Sector Accounting Standards Board 2001 that have listed ordinary shares, are in the
(PSASB) with effect from 1 January 2000. CLERP process of listing, or disclose EPS in their
also introduced a Financial Reporting Council to financial report, in relation to annual reporting
periods beginning on or after 1 July 2001).
oversee the operations of the AASB.
• AASB 1029 – “Interim Financial Reporting”
The Corporations Act 2001 requires that the (Disclosing entities that are required to prepare
financial statements of entities reporting under the half-year financial reports under Part 2M.3 of the
Corporations Act 2001 comply with Accounting Corporations Act 2001, and entities that prepare
Standards: s.296. If the directors are of the opinion interim financial reports that are general
that compliance with Accounting Standards does purpose financial reports, in relation to interim
not result in a true and fair view they are required periods beginning on or after 1 July 2001).
to provide additional information and explanations • AASB 1032 – “Specific Disclosures by Financial
by way of a note to the financial statements: Institutions” (Financial Institutions that are
s.295(3)(c). required to prepare general purpose financial
reports under Part 2M.3 of the Corporations Act
2001).
Application
• AASB 1034 – “Financial Reports Presentation
As a result of the amendments specified in AASB and Disclosure” (Entities required to prepare a
1025 “Application of the Reporting Entity Concept financial report under Chapter 2M of the
and Other Amendments”, AASB 1030 “Application Corporations Act 2001 in relation to half-years
of Accounting Standards to Financial Year ending on or after 31 December 2000 and
Accounts and Consolidated Accounts of Disclosing financial years ending on or after 30 June 2001).
Entities other than Companies” and AASB 1043 • AASB 1038 – “Life Insurance Business” (Life
“Changes to the Application of AASB and AAS insurers and parent entities in an economic
Standards and Other Amendments”, AASB entity that includes a life insurer that are
accounting standards (except for those accounting required to prepare general purpose financial
standards noted below) apply to all 22entities that reports under Part 2M.3 of the Corporations Act
are required to prepare general purpose financial 2001).
reports under Part 2M.3 of the Corporations Act
2001.

22
• AASB 1040 – “Statement of Financial Position” The Move Towards Adoption of
(Entities required to prepare a financial report International Accounting Standards
under Chapter 2M of the Corporations Act 2001
in relation to half-years ending on or after 31 In July 2002, the Financial Reporting Council
December 2000 and financial years ending on formalised its support for adoption by Australia
or after 30 June 2001). of international accounting standards by 2005.
Further, in September 2002, the Corporate Law
• AASB 1045 – “Land Under Roads” (Local
Economic Reform Program Issues Paper No. 9
governments, government departments,
(CLERP 9) was issued which proposes that the
Commonwealth, State and Territory
governments required to prepare general
body of International Accounting Standards Board
purpose financial reports, financial reports held (IASB) standards be adopted in Australia for
out to be general purpose financial reports by a reporting periods beginning on or after 1 January
government department that is not a reporting 2005. Part 12 “International Accounting Standards”
entity and general purpose financial reports provides more information on the adoption of
of each Commonwealth, State and Territory IASB Standards by Australia.
Government.)

The Move Towards a Single Series of

Accounting Standards
In August 2000 the AASB commenced the issue of
Standards presented in a format that combines the
formats previously used in AASB Standards and
AAS Standards in order to move towards the issue
of a single series of Standards. That is, Standards
now issued by the AASB will have application to
each entity that is required to prepare financial
reports under Part 2M.3 of the Corporations Act
2001 and that is a reporting entity, and general
purpose financial reports of each other reporting
entity. At the date of this publication, those
Standards released in the combined format are
AASB 1005 “Segment Reporting”, AASB 1012
“Foreign Currency Translation”, AASB 1027
“Earnings Per Share”, AASB 1029 “Interim
Financial Reporting”, AASB 1041 “Revaluation of
Non-Current Assets” (July 2001), AASB 1042
“Discontinuing Operations”, AASB 1043 “Changes
to the Application of AASB and AAS Standards and
Other Amendments” and AASB 1044 “Provisions,
Contingent Liabilities and Contingent Assets”.

23
AASB Accounting Standards
The following table lists the AASB accounting standards currently on issue. Where a revised standard has
been issued but is not operative until after 30 June 2003, both the current and the revised standards have
been listed.

Number Subject Issued Application Date

AASB 1001 Accounting Policies 03/99 Financial years ending on or after 31

December 1999

AASB 1002 Events Occurring after Reporting Date 10/97 Financial years ending on or after 30
June 1998

AASB 1004 Revenue 06/98 Financial years ending on or after 30

June 1999

AASB 1005 Segment Reporting 08/00 Annual Reporting periods beginning

on or after 1 July 2001

AASB 1006 Interests in Joint Ventures 12/98 Financial years ending on or after 31
December 1999

AASB 1008 Leases 10/98 Financial years ending on or after 31

December 1999

AASB 1009 Construction Contracts 12/97 Financial years ending on or after 31

December 1998

AASB 1010 Recoverable Amount of Non-Current 12/99 Reporting periods beginning on or

Assets after 1 July 2000

AASB 1011 Accounting for Research and 05/87 Financial years ending on or after
Development Costs 30 September 1987

AASB 1012 Foreign Currency Translation 11/00 Annual reporting periods beginning on
or after 1 January 2002

AASB 1013 Accounting for Goodwill 06/96 Financial years ending on or after
30 June 1996

AASB 1014 Set-off and Extinguishment of Debt 12/96 Financial years ending on or after
31 December 1997

AASB 1015 Acquisitions of Assets 11/99 Half-years ending on or after 30 June

2000 and financial years ending on or
after 31 December 2000

AASB 1016 Accounting for Investments in Associates 08/98 Financial years ending on or after
30 June 1999

AASB 1017 Related Party Disclosures 02/97 Financial years ending on or after
30 June 1997

AASB 1018 Statement of Financial Performance 06/02 Annual reporting periods ending on or
after 30 June 2002

AASB 1019 Inventories 03/98 Financial years ending on or after 30

June 1999

AASB 1020 Accounting for Income Tax 10/89 Financial period that ends on or after
(Tax-effect Accounting) 31 December 1989

24
Number Subject Issued Application Date

AASB 1020 Income Taxes 12/99 Half-years ending on or after 30

June 2005 and financial years
ending on or after 31 December 2005
(Operative date amended by AABS 1020B)

AASB 1021 Depreciation 08/97 Financial years ending on or after 30

June 1998

AASB 1022 Accounting for the Extractive Industries 10/89 Financial period that ends on or after
31 December 1989

AASB 1023 Financial Reporting of General 11/96 Financial years ending on or after
Insurance Activities 31 December 1997

AASB 1024 Consolidated Accounts 05/92 Financial years ending on or after 30

June 1992

AASB 1025 Application of the Reporting Entity 07/91 Financial years ending on or after
Concept and Other Amendments 30 June 1992

AASB 1026 Statement of Cash Flows 10/97 Financial years ending on or after 30
June 1998

AASB 1027 Earnings per Share 06/01 Annual reporting periods beginning on
or after 1 July 2001

AASB 1028 Accounting for Employee Entitlements 03/94 Financial years ending on or after 30
June 1995

AASB 1028 Employee Benefits 06/01 Annual reporting periods beginning on

or after 1 July 2002

AASB 1029 Interim Financial Reporting 10/00 Interim financial periods beginning on
or after 1 July 2001

AASB 1030 Application of Accounting Standards to 12/94 Financial years commencing on or after
Financial Year Accounts and Consolidated 1 July 1994
Accounts of Disclosing Entities Other
than Companies

AASB 1031 Materiality 09/95 Financial years ending on or after 30

June 1996

AASB 1032 Specific Disclosures by Financial 12/96 Financial years ending on or after
Institutions 31 December 1997

AASB 1033 Presentation and Disclosure of 10/99 Half-years ending on or after 30

Financial Instruments June 2000 and financial years ending
on or after 31 December 2000

AASB 1034 Financial Report Presentation and 10/99 Half-years ending on or after 31
Disclosures December 2000 and financial years
ending on or after 30 June 2001

AASB 1036 Borrowing Costs 12/97 Financial years ending on for after 31
December 1998

AASB 1037 Self-Generating and Regenerating Assets 08/98 Financial years ending on or after 30
June 2001

AASB 1038 Life Insurance Business 11/98 Financial years ending on or after 31
December 1999

AASB 1039 Concise Financial Reports 06/02 Annual reporting periods ending on or
after 30 June 2002

25
 Number Subject Issued Application Date

AASB 1040 Statement of Financial Position 10/99 Half-years ending on or after 31

December 2000 and financial years
ending on or after 30 June 2001

AASB 1041 Revaluation of Non-Current Assets 07/01 Reporting periods ending on or after
30 September 2001

AASB 1042 Discontinuing Operations 08/00 Annual reporting periods beginning on

or after 1 July 2001

AASB 1043 Changes to the Application of 12/00 Annual reporting periods and interim
AASB and AAS Standards and Other reporting periods ending on or after
Amendments 1 July 2000

AASB 1044 Provisions, Contingent Liabilities and 10/01 Annual reporting periods beginning
Contingent Assets on or after
1 July 2002

AASB 1045 Land Under Roads: Amendments to AAS 10/02 Annual reporting periods ending
27A, 29A and AAS 31A on or after 31 December 2002

AASB 1001: Accounting Policies Basis of Accounting

(AAS 6) The financial report must be prepared on a going
concern basis unless it is intended to either
Criteria for Selection and Application of liquidate the entity or to otherwise wind up its
operations, or there is no realistic alternative but to
Accounting Policies
liquidate the entity or to otherwise wind up its
To ensure that the substance of the underlying operations.
transactions and other events is reported in the
financial report, accounting policies must be The statement of financial performance and
selected and applied in a manner which ensures statement of financial position must be prepared
that the resulting financial information satisfies on an accrual basis.
the concepts of relevance and reliability. When
developing an accounting policy in the absence of Disclosure of Accounting Policies
a specific Australian Accounting Standard or UIG
A summary of accounting policies must be
Consensus View, guidance is provided on other
presented in the initial section of the notes to the
pronouncements that should be considered, in
financial statements. The summary must:
order of preference.
a state that the financial report is a general
purpose financial report;
Consistency of Application of Accounting
Policies b state whether the financial report has been
prepared in accordance with:
Accounting policies must be applied in a manner
i Accounting Standards;
which ensures that the resulting financial
information is comparable and understandable, ii other authoritative pronouncements of the
without sacrificing its relevance and reliability. Australian Accounting Standards Board
and/or the Public Sector Accounting
Standards Board; and
iii Urgent Issues Group Consensus Views;

26
c describe the measurement basis or bases used in income tax balances, must be recognised as a
preparing the financial report; and revenue or an expense in the statement of financial
d describe each specific accounting policy that is performance in the financial year in which the
necessary for a proper understanding of the change is made.
financial report.
However, the revised Standard prescribes that
when it is not practicable to determine the
Circumstances in which a Change in cumulative financial effect up to the end of the
Accounting Policy is Permitted preceding financial year of a change in accounting
A change in accounting policy must be made only policy (that is not a change arising on the initial
when: adoption of another Accounting Standard or UIG
Consensus View), the new accounting policy must
a it is necessary in order to comply with another be applied from the beginning of the current
Accounting Standard or UIG Consensus View; financial year.
b no specific Accounting Standard applies and the
change will result in an overall improvement in
Impact on Comparative Information
the relevance and reliability of financial
information about the financial performance, Comparative information on the face of the
financial position and cash flows of the entity; or financial statements must not be restated where
c an Accounting Standard permits alternative the cumulative financial effect up to the end of the
accounting policies and the change from one preceding financial year of a change in accounting
permitted accounting policy to another policy is recognised as a revenue or an expense in
permitted accounting policy will result in an the statement of financial performance in the
overall improvement in the relevance and financial year in which the change is made.
reliability of financial information about the
financial performance, financial position and Disclosure of Changes in Accounting
cash flows of the entity.
Policy

Accounting for a Change in Accounting

Change in the Current Financial Year
Policy
Where a change in an accounting policy from that
Initial Adoption of Accounting Standards or applied in the preceding financial year has an effect
UIG Consensus Views in the current financial year or any prior financial
years presented in the financial report, or is
A change in accounting policy that is made on the expected to have an effect in a subsequent financial
initial adoption of another Accounting Standard or year, the following must be disclosed in the
UIG Consensus View must be accounted for in summary of accounting policies or in a note
accordance with the specific transitional provisions referred to in the summary of accounting policies:
of that Accounting Standard or UIG Consensus
View. a the nature of the change;
b the reasons for the change;
Other Changes in Accounting Policy c the amount of the adjustment, if any, recognised
as a revenue or an expense in the statement of
In relation to a change in accounting policy that is financial performance for the financial year;
not a change arising on the initial adoption of
d the amount of the adjustment, if any, to the
another Accounting Standard or UIG Consensus
opening balance of retained profits or
View, the cumulative financial effect of such
accumulated losses of the current financial year;
change must be calculated as if the new accounting
and
policy had always been applied. The cumulative
financial effect up to the end of the preceding e the amount of the adjustment relating to prior
financial year, including any adjustment to deferred financial years, including:

27
 i where practicable, the restatement of b a statement that each event occurred after
comparative information for each prior balance date;
financial year presented in the financial c a statement that the financial effect was not
report to show the information that would brought to account;
have been disclosed in the prior financial year
had the new accounting policy always been d subject to paragraph (e), the financial effect of
applied. If it is impracticable to restate the each event or, where it is not possible to estimate
comparative information for each prior the effect reliably, a statement to that effect; and
financial year presented, that fact must be e where the event provides evidence that the going
disclosed; and concern basis is not appropriate for the entity or
ii the amount of the adjustment relating to for a subsidiary of the economic entity (where
financial years prior to those presented in the the reporting entity is an economic entity) after
financial report. the reporting date:
i assets for which the going concern basis is
Change in the Prior Financial Year not appropriate, the carrying amounts and the
amounts for which the assets are expected to
Where a change in accounting policy made in the be realised; and
preceding financial year did not have a material
ii liabilities for which the going concern basis is
effect in that financial year but has a material effect
not appropriate, the carrying amounts and the
in the current financial year, the following must be
amounts for which the liabilities are expected
disclosed in the summary of accounting policies or
to be settled.
in a note referred to in the summary of accounting
policies:
AASB 1003: Foreign Currency
a the nature of the change;
b the reasons for the change;
Translation – Disclosure
c that the change was made in the preceding This Standard has been replaced by AASB 1012
financial year; and and ceased to be operative for financial periods
beginning on or after 1 January 1988.
d the financial effect of the change in the current
financial year.
AASB 1004: Revenue (AAS 15)
AASB 1002: Events Occurring
After Reporting Date (AAS 8) Accounting Requirements
Revenue must be measured at the fair value of the
Disclosure Requirements consideration or contributions received or
receivable.
Post balance date (or subsequent) events which:
Revenue from the sale of goods or disposal of other
a aid in determining the amount of an item which
assets can only be recognised when control of the
was uncertain at balance date; or
assets has passed to the buyer, it is probable that
b reveal for the first time a condition that existed the economic benefits comprising the
at balance date, thereby leading to a different consideration will flow to the entity and the
assessment of the item at balance date; amount of revenue can be measured reliably.
should be brought to account.
Revenue arising from the rendering of services,
Post balance date (or subsequent) events which do where the outcome of the contract can be
not relate to any conditions existing at balance date, measured reliably, must be recognised by reference
but the effects of those events are material in to the stage of completion of the contract where:
relation to the financial statements, the following
a the entity controls a right to be compensated for
information must be disclosed:
services rendered;
a a description of each event; b it is probable that the economic benefits
comprising the consideration flow to the entity;

28
c the amount of revenue can be reliably estimated; AASB 1005 Segment Reporting
and
A revised version of AASB 1005 “Segment
d the stage of completion of the transaction can be
Reporting” was issued in August 2000. The revised
reliably measured.
Standard applies to annual reporting periods
However where the outcome of a contract to beginning on or after 1 July 2001.
provide services cannot be reliably estimated, The main features of the revised Standard are as
contract costs must be recognised as an expense in follows:
the financial year in which they are incurred and
where it is probable that the costs will be recovered,
Identifying Segments
revenue must be recognised only to the extent of
costs incurred. The Standard requires information be reported for
business segments (similar to previous industry
Specific guidance is also provided on the
segments) and geographical segments.
recognition of rents, interest, royalties, dividends,
contributions of assets, liabilities forgiven and An entity’s organisational and management
exchange of goods or services. structure and internal financial reporting system to
the chief executive officer and the governing body
Disclosure Requirements normally provide the best evidence of whether the
entity’s predominant source of risks and returns
The financial report shall disclose: relate to the products and services it provides or to
a the accounting policies adopted for the the fact that it operates in different geographical
recognition of revenues, including the methods areas. Therefore, an entity normally reports
adopted to determine the stage of completion of segment information in its financial report on the
contracts involving the rendering of services; same basis as it reports internally. However, where
the entity’s internal organisational and
b the amount of each category of revenue
management structure and its system of internal
recognised during the financial year, including:
financial reporting to the chief executive officer and
i the sale of goods; the governing body are not based on business or
ii the rendering of services; geographical segments, for the purpose of financial
iii rents; reporting, the entity’s segments must be
iv interest, including items of a similar nature; determined in accordance with the definitions
prescribed by the Standard.
v royalties;
vi dividends;
Primary and Secondary Segment Reporting
vii the disposal of assets other than goods,
including non-current assets; Format
viii contributions of assets, including cash and Where the entity’s risks and returns are affected
non-monetary assets; predominately by differences in the products and
ix the forgiveness of liabilities; and services it provides compared to differences in the
geographical areas in which it operates, the entity
x any other source; and
must use:
c the amount of revenue arising from exchanges
or swaps of goods or services included in any a business segments as its primary reporting
category of revenue. format; and
In relation to each disclosure made, there must be b geographical segments as its secondary reporting
separate disclosure of revenue arising from: format.

a the operating activities of the entity; and Where the entity’s risks and returns are affected
predominately by differences in the geographical
b outside the operating activities of the entity.
areas in which it operates compared to differences

29
in the products and services it provides, the entity e the total amount recognised during the annual
must use: reporting period for the acquisition of segment
assets that are expected to be used during more
a geographical segments as its primary reporting than one annual reporting period;
format; and
f the total amount of expenses included in
b business segments as its secondary reporting segment result for depreciation and amortisation
format. of segment assets;
Where an entity’s risks and returns are strongly g the total amount of non-cash expenses, other
affected both by differences in the products and than those disclosed under paragraph (f), above,
services it provides and by differences in the included in segment expenses;
geographical areas in which it operates, the entity
h the aggregate of the entity’s share of the net
must use business segments as its primary
profit or loss/result of associates or other
segment reporting format and geographical
investees accounted for by the equity method of
segments as its secondary segment reporting accounting if substantially all those associates’ or
format. other investees’ operations are within the
segment; and
Reportable Segments i the aggregate carrying amount of investments in
A business segment or geographical segment must those associates and investees for which
be identified as a reportable segment if a majority disclosure is made in accordance with paragraph
of its segment revenues arise from sales to external (h), above.
customers and:
Disclosure of “Secondary“ Segment
a its revenues from sales to external customers Information
and from sales to other segments is 10 per cent
or more of the total segment revenues of all Where the entity’s primary format for reporting
segments; segment information is business segments, the
b its segment result, whether profit or loss/result, financial report must disclose the following for
is 10 per cent or more of the combined result of each geographical segment where the total
all segments that earned a profit or the revenues from sales to external customers is 10 per
combined result of all segments that incurred a cent or more of total entity revenues from sales to
loss, whichever is the greater in absolute all external customers or whose total segment
amount; or assets is 10 per cent or more of the total assets of
all geographical segments:
c its assets are 10 per cent or more of the total
segment assets of all segments. a segment revenues from external customers by
geographical area based on the geographical
Disclosure of ”Primary“ Segment location of its customers;
Information b the total carrying amount of segment assets by
geographical location of assets; and
The financial report must disclose the following
information for each reportable segment that is c the total amount recognised during the annual
required to be disclosed, using the primary reporting period for the acquisition of segment
segment reporting format: assets that are expected to be used during more
than one annual reporting period by
a segment revenues distinguishing between geographical location of assets.
revenues from sales to external customers and
Where the entity’s primary format for reporting
revenues from transactions with other segments;
segment information is geographical segments
b segment result; (whether based on location of assets or location of
c segment assets; customers), the financial report must disclose the
d segment liabilities; following for each business segment where the
total revenues from sales to external customers is

30
10 per cent or more of total entity revenues from Disclosures for Joint Venture Operations
sales to all external customers or whose total
A venturer with interests in joint venture
segment assets is 10 per cent or more of the total
operations must disclose:
assets of all business segments:
a the name and principal activities of each joint
a segment revenues from external customers;
venture operation;
b the total carrying amount of segment assets; and
b its percentage interest in the output of each joint
c the total amount recognised during the annual venture operation during the financial year; and
reporting period for the acquisition of segment
c for each category of assets, the amount
assets that are expected to be used during more
employed in joint venture operations.
than one annual reporting period.

Accounting for Joint Venture Entities

AASB 1006: Interests in Joint A venturer that has an interest in a joint venture
Ventures (AAS 19) entity that is a partnership must apply the equity
method of accounting in its own financial report
Key Definitions and, where applicable, its consolidated financial
report in accordance with Section 5 of AASB 1016
“Joint venture” means a contractual arrangement “Accounting for Investments in Associates”.
whereby two or more parties undertake an
economic activity which is subject to joint control. In accordance with Section 5 of AASB 1016, a
venturer that has an interest in a joint venture
“Joint control” means the contractually agreed entity that is not a partnership must:
sharing of control over an economic activity, that is
where two or more parties (venturers) together a apply the equity method of accounting in its
have the capacity to dominate the making of major consolidated financial report and the cost
decisions in relation to the economic activity. method in its own financial report; or
b apply the equity method of accounting in its own
“Joint venture entity” means a joint venture that is
financial report if it does not prepare a
in the form of a corporation, partnership or other
consolidated financial report.
form of entity established separate from the
venturers.
Disclosures for Joint Venture Entities
“Joint venture operation” means a joint venture
A venturer with interests in joint venture entities is
that is not a joint venture entity – that is, it does
not required to comply with the disclosure
not involve separate entities and may simply be an
requirements of AASB 1016 in relation to its
arrangement to share assets.
investment in a joint venture entity.
Note, a joint venture entity and a joint venture
A venturer with interests in joint venture entities
operation does not include an entity:
must disclose the following information:
a that is acquired and held exclusively with a view
a the name and principal activities of each joint
to its disposal in the near future; or
venture entity;
b that operates under severe long-term restrictions
b the joint venture entity’s reporting date, if it is
which impair significantly its ability to make
different from that of the venturer;
distributions to the venturer.
c its ownership interest in each joint venture
entity as at the joint venture entity’s reporting
Accounting for Joint Venture Operations
date and, if different, at the venturer’s reporting
A venturer in a joint venture operation must date;
recognise the assets, liabilities and expenses arising d the proportion of voting power held in each joint
from its interest in a joint venture operation and venture entity where it is different from the
revenues from the sale or use of its share of the proportion of ownership interest;
output of a joint venture operation.

31
e the amounts of retained profits or accumulated ii contingent liabilities that arise because the
losses as at the beginning and end of the venturer could be liable for the liabilities of
financial year which are attributable to its other venturers, including the amount arising
interest in joint venture entities; from a guarantee provided for the liabilities of
f the amounts of other reserves at the beginning other venturers; and
and end of the financial year which are b separately from the amount of its other capital
attributable to its interest in joint venture commitments, the aggregate of:
entities; i capital commitments arising from its
g a schedule setting out the movements in the interests in joint ventures including those
carrying amount of investments in joint venture that have been contracted jointly with other
entities, separately identifying the carrying venturers for which it will be liable; and
amount as at the beginning and end of the ii its share of the capital commitments of joint
financial year, and the amounts of new venture entities for which it will be liable,
investments, disposals, share of the results, that have been contracted for as at the reporting
dividends and other movements; date and have not been recognised as liabilities.
h the financial effects of events occurring after
reporting date of a joint venture entity which
could materially affect the financial position or AASB 1007: Financial Reporting
operating performance of that joint venture of Sources and Applications of
entity for the next financial year;
Funds (AAS 12)
i where adjustments to eliminate the effect of
dissimilar accounting policies cannot be made, Due to the application of AASB 1026 “Statement of
the nature of the dissimilarities; Cash Flows” this Standard does not apply to
financial years ending on or after 30 June 1992.
j in a summarised presentation, its share of the
joint venture entity’s:
i current and non-current assets and liabilities; AASB 1008: Leases (AAS 17)
ii revenues and expenses;
iii operating results before income tax; Classification of Leases
iv income tax expense attributable to operating A lease in which substantially all of the risks and
results; and benefits incident to ownership of the leased
v extraordinary items (net of income tax); and property effectively pass from the lessor to the
k the aggregate amount of expenditure lessee should be classified as a finance lease by
commitments, other than for the supply of both the lessee and the lessor. This is normally
inventories, arising from interests in joint assumed to have occurred where the lease is non-
venture entities for which it will be liable. cancellable and either:
a the lease term is greater than 75% of the asset’s
Other Disclosure Requirements
useful life; or
The financial report shall disclose: b the present value of minimum lease payments
a separately from the amount of its other exceeds 90% of the asset’s fair value.
contingent liabilities, the aggregate of: A lease in which substantially all of the risks and
i contingent liabilities arising from its interests benefits incident to ownership of the lease property
in joint ventures, including the amount for effectively remain with the lessor should be
which it could be liable jointly with other classified as an operating lease.
venturers and its share of the contingent
liabilities of joint venture entities for which it
could be liable; and

32
Accounting by Lessees Disclosure by Lessees

1 Finance Leases 1 Finance Leases

For finance leases the lessee should record an a the carrying amount of each class of lease asset
initial asset and liability which will equate with the as at reporting date;
present value of the minimum lease payments b contingent rentals recognised as an expense in
(rental payments over the term of the lease and any the financial year;
guaranteed residual value). The discount rate to be
c lease commitments reconciled to the lease
used in determining the present value of the liability and classified into less than one year,
minimum lease payments is the interest rate one to five years and later than five years;
implicit in the lease, or where impracticable, the
d for non-cancellable sub-leases, the total of future
lessee’s incremental borrowing rate.
minimum lease payments expected to be
The leased asset should be depreciated in received as at the reporting date ; and
accordance with AASB 1021. Minimum lease e a general description of the lessee’s leasing
payments should be allocated between interest arrangements including but not limited to the
expense and the reduction of the lease liability. following:
Where a sale and leaseback transaction involves a i the basis on which contingent rental
leaseback which is classified as a finance lease by payments are determined;
the lessee, the transaction must not be accounted ii the existence and terms of renewal or
for as a sale. The difference between the proceeds purchase options and escalation clauses; and
received by the lessee and the carrying amount of iii restrictions imposed by lease arrangements
the asset must be deferred and amortised over the such as those concerning dividends,
lease term. additional debt, and further leasing.

2 Operating Leases 2 Operating Leases

The minimum lease payments should be a the total amount of rental expense recognised in
recognised as an expense as and when incurred. the financial year, with separate amounts for
minimum lease payments, contingent rentals,
Where a sale and leaseback transaction involves a and rental expense arising from sub-leases;
leaseback which is classified as an operating lease b for non-cancellable sub-leases, the total of future
by the lessee and the sales price is established at minimum lease payments expected to be
fair value, any profit or loss on the sale must be received as at the reporting date;
recognised immediately. However, where the sale
c for non-cancellable operating leases, the
price is not established at fair value and the
minimum lease payments and, where different
carrying amount of the asset exceeds fair value, the from the minimum lease payments, the lease
asset must be written down to fair value before commitments classified between less than one
applying the following methodology: year, one to five years and later than five years;
a if the sale price is below fair value, any profit or and
loss must be recognised immediately except that, d a general description of the lessee’s leasing
to the extent the loss is compensated by future arrangements including, but not limited to the
rentals at below market price, it must be following:
deferred and amortised in proportion to the i the basis on which contingent rental
rental payments over the lease term; or payments are determined;
b if the sale price is above fair value, the excess of ii the existence and terms of renewal or
the sale price over the fair value must be purchase options and escalation clauses; and
deferred and amortised in proportion to the
iii restrictions imposed by lease arrangements,
rental payments over the lease term.
such as those concerning dividends,
additional debt, and further leasing.

33
Accounting by Lessors c the accumulated allowance for uncollectable
minimum lease payments receivable;
1 Direct Financing Leases d contingent rentals recognised as revenues in the
financial year; and
This is a finance lease other than a sales type lease.
The present value of the minimum lease payments e a general description of the lessor’s leasing
plus the present value of any unguaranteed arrangements.
residual should be recognised as a receivable. The
discount rate to be used in determining the present 2 Operating Leases
value of the minimum lease payments is the a for each class of asset:
interest rate implicit in the lease. The finance
i the gross amount of leased assets as at the
income attributable to the lease should be
reporting date;
recognised progressively over the lease term to
ii accumulated depreciation as at the reporting
achieve a constant periodic rate of return on the
date;
carrying amount of the lease receivable.
iii accumulated write-downs to recoverable
amount as at the reporting date;
2 Sales Type Leases
iv depreciation and write-downs recognised as
This is a lease in which the fair value of the an expense in the financial year;
property differs from its cost to the lessor. This v reversals of write-downs recognised as
difference should be recognised in net profit or revenues in the financial year;
loss in the period the transaction takes place. b lease commitments receivable as at the reporting
date;
3 Operating Leases c for non-cancellable operating leases, the future
Leased property should be recognised as a non- minimum lease payments classified into less
current asset and rental income should be than one year, one to five years and later than
recognised in net profit or loss for the reporting five years;
period. d contingent rentals recognised as revenues in the
financial year; and
Initial direct costs identified as relating to a direct
e a general description of the lessor’s leasing
financing lease should be included in the lessor’s
arrangements.
investment in the lease while those costs relating to
a sales type lease should be accounted for as cost of
sales. Initial direct costs identified as relating to an AASB 1009: Construction
operating lease should be carried forward and
Contracts (AAS 11)
amortised.

Combining and Segmenting Construction

Disclosure by Lessors
Contracts

1 Finance Leases Construction contracts may be treated separately,

grouped or split by separately identifiable
a a reconciliation of the aggregate of the components to reflect the substance of a contract
minimum lease payments and any unguaranteed or group of contracts, rather than the legal form.
residual value from the standpoint of the lessor, When considering the most appropriate treatment
to the lease receivable classified into less than of construction contracts, consideration should be
one year, one to five years and later than five
given to whether:
years, disclosing separately lease finance revenue
not yet recognised as revenues and the a separate proposals were submitted for each
unguaranteed residual values; contract;
b lease commitments receivable as at the reporting b each contract was subject to separate
date; negotiations;

34
c costs and revenues from the construction of each Where the Contract Outcome Can Be
item can be separately identified; and Reliably Estimated
d contracts are interrelated and Where the outcome of a construction contract can
performed/completed concurrently.
be estimated reliably, revenues and expenses
arising from the contract must be recognised in net
Contract Revenue profit or loss for the reporting period by reference
Revenue arising from a construction contract must to the stage of completion of the contract as at the
be measured at the fair value of the consideration reporting date. As such, revenues and expenses are
received or receivable by the contractor and recognised immediately where they relate to
comprises: current construction activities, but where they
relate to future activity, they should be recognised
a amounts determined in accordance with the as an asset, where it is probable that such costs will
contract; and be recovered in the future. However where the
b amounts arising from variations, claims and contract is expected to make a loss, the excess of
incentive payments where it is probable that total contract costs over total contract revenue, to
conditions for receipt will be met and the the extent that it has not been recognised, must be
amounts can be measured reliably. recognised as an expense immediately.

Contract Costs For these calculations where total contract revenues

or expenses is used and the estimates are revised,
Costs arising from a construction contract include: the changed estimates must be applied in
a costs that relate directly to the contract, (eg. the determining the amounts of revenues and
cost of securing the contract, direct materials, expenses recognised in the financial year of the
site labour, depreciation of plant and equipment change and subsequent financial years.
used in the construction activity, costs of moving
plant and equipment to and from a site, and Estimated Reliably
expected warranty costs);
The outcome of a contract can be estimated reliably
b costs that are related to construction activities in
when:
general and can be allocated to the contract on a
reasonable basis (eg. insurance, design and a in the case of a fixed price contract:
technical assistance, payroll processing costs); i total revenues, costs to complete and stage of
and completion can be reliably estimated;
c other costs that are specifically chargeable to the ii it is probable that the economic benefits
customer under the terms of the contract (eg. arising from the contract will flow to the
general administration and development costs). contractor; and
Costs that do not form part of the contract costs iii the costs can be clearly identified and
include: compared with prior estimates.
a general administration costs for which b in the case of a cost plus contract:
reimbursement is not specified in the contract; i it is probable that the economic benefits
b selling costs; arising from the contract will flow to the
contractor; and
c research and development costs that are not
directly related to the contract; and ii costs related to the contract, whether or not
specifically reimbursable, can be clearly
d depreciation of idle plant and equipment that is
identified and measured reliably.
not used in a particular contract.

35
Stage of Completion For construction contracts in progress as at reporting
date, the following amounts must be disclosed in
The stage of completion should be determined by
aggregate:
using the method that measures reliably the work
performed. Depending on the nature of the a contract costs incurred and recognised profits (less
contract, the methods may include: recognised losses) to date;
a the use of physical estimates; b advances received;
b surveying work performed; and c retentions; and
c the cost method. d consideration received and receivable as progress
billings (including retentions) and advances received.
The commentary to the Standard suggests that
progress payments and advances from customers
often do not reflect the work performed under the AASB 1010: Recoverable Amount
contract and accordingly, would not normally be an of Non-Current Assets (AAS 10)
appropriate method for determining the stage of
completion. This Standard was issued in December 1999 and applies
to reporting periods beginning on or after 1 July 2000.

Where Contract Outcome Cannot Be

Reliably Estimated Exclusions

Where the outcome of a construction contract

Not–For–Profit Entities
cannot be reliably estimated:
This Standard does not apply to non-current assets of
a contract costs must be recognised as an expense
not-for-profit entities where the future economic benefits
in the financial year in which they are incurred;
comprising those assets are not primarily dependent on
and
the assets’ ability to generate net cash inflows.
b where it is probable that the costs will be
recovered, revenue must be recognised only to
the extent of costs incurred. Measurement of Non-Current Assets on the Fair
Value Basis
Where the uncertainties about the outcome of a
construction contract no longer exist, revenue and This Standard does not apply to non-current assets
expenses associated with the contract must be measured at fair value, net market value or net fair
recognised under the stage of completion method value as required or permitted by another Accounting
described above. Standard.

Disclosure Requirements Inventory

The following information must be separately This Standard does not apply to inventories.
disclosed:
a the aggregate amount of revenue arising from Recoverable Amount
construction contracts recognised during the A non-current asset must be written down to its
financial year; recoverable amount when its carrying amount is greater
b the methods used to determine the contract than its recoverable amount. However, where a group of
revenue recognised during the financial year; assets working together supports the generation of net
c the methods used to determine the stage of cash inflows relevant to the determination of recoverable
completion of construction contracts in progress; amount, the net cash inflows must be estimated for the
d the amount due from customers for contract relevant group of assets and the recoverable amount test
work, as an asset; and must be applied to the carrying amount of that group of
assets.
e the amount due to customers from contract
work, as a liability.

36
“Recoverable amount” means, in relation to an must disclose the aggregate carrying amount of
asset, the net amount that is expected to be each of the following:
recovered through the cash inflows and outflows
a assets within that class of non-current assets
arising from its continued use and subsequent
which are carried at that recoverable amount
disposal.
less, where applicable, any subsequent
accumulated depreciation; and
Community Service Obligations b any other assets within that class of non-current
Where, pursuant to legislation, ministerial directive assets.
or other government authority, non-current assets The financial report must, regardless of whether
are used to provide goods or services at no charge, non-current assets have been written down to
or at less than full cost recovery, those assets must recoverable amount during the reporting period,
be included in the group of assets that is disclose whether, the expected net cash flows
dependent on the provision of those goods or included in determining the recoverable amounts
services to enable it to generate net cash inflows. of non-current assets have been discounted to their
The net cash inflows must be estimated for that present value.
group of assets and the recoverable amount test
must be applied to the carrying amount of that
group of assets. AASB 1011: Accounting for
Research and Development Costs
Accounting for Recoverable Amount Write- (AAS 13)
Downs
Research and development (R&D) is systematic
Where the carrying amount of a non-current asset investigation or experimentation which involves
or a group of non-current assets is written down to innovation or technical risk and is carried on for
its recoverable amount, the decrement in that the purpose of acquiring new knowledge, or
carrying amount must be recognised as an expense developing new products or significant
in net profit or loss for the reporting period in improvement to existing products.
which the recoverable amount write-down occurs.

Elements of Costs to be included in

Disclosure Requirements Research and Development
Where the carrying amount of a non-current asset R&D costs include cost of materials and services,
or a class of non-current assets has been written salaries, wages and other personnel costs,
down to its recoverable amount, the financial depreciation of equipment and facilities,
report must, in respect of each such non-current amortisation of patents and other costs directly
asset or class of non-current assets, disclose: attributable to R&D activities.
a its carrying amount;
b the recoverable amount write-down recognised Accounting Requirements
during the reporting period; and R&D costs should be expensed as incurred except
c the assumptions made in respect of its in relation to specific projects where future benefits
recoverable amount. are expected, beyond reasonable doubt, to be
Where some or all of the assets within a class of recoverable. R&D costs which did not previously
non-current assets have been written down to their meet the criteria for deferral and were recognised
recoverable amount during the reporting period or in net profit or loss may not be subsequently
a previous reporting period, the financial report written back.

37
R&D costs carried forward should be reassessed that difference, net of the effects of a hedge of
annually and amortised in line with future benefits the monetary item, must be capitalised as part
commencing from the commercial production or of the cost of that asset in accordance with
sale of the product. Grants received should be Accounting Standard AASB 1036 and Australian
credited against the carrying amount. Accounting Standard AAS 34 “Borrowing Costs”;
and

Disclosure Requirements b Exchange differences relating to foreign currency

monetary items forming part of the net
The financial report must disclose: investment in a self-sustaining foreign operation
must be recognised as revenues or expenses in
a R&D costs recognised in net profit or loss for the
net profit or loss/result in the reporting period in
reporting period (before crediting related grants);
which the exchange rates change. On
b R&D costs incurred and deferred (before incorporation of the foreign operation into the
crediting related grants); entity’s financial report, the exchange
c deferred R&D costs, with accumulated differences, together with any income tax
amortisation shown as a deduction therefrom; expense (income tax revenue) arising from such
and differences, must be eliminated against the
d basis for amortising R&D costs. foreign currency translation reserve.

Hedge Transactions
AASB 1012: Foreign Currency
To be classified as a hedge, a transaction must:
Translation
a be designated at inception as a hedge; and
Revised AASB 1012 “Foreign Currency Translation”
was issued in November 2000 and applies to b while continuing to be classified as a hedge, be
expected to be effective in mitigating possible
annual reporting periods beginning on or after
adverse financial effects of movements in
1 January 2002.
exchange rates resulting from the hedged
transaction or anticipated hedged transaction.
Foreign Currency Transactions
In relation to transactions intended to hedge
Each asset, liability, item of equity, revenue or specific purchases or sales:
expense arising from entering into a foreign
a costs or gains arising at the time of entering into
currency transaction must be recognised and
the transactions; and
translated using the spot rate at the date of the
transaction. b exchange differences, to the extent that they arise
up to the dates of purchase or sale,
Foreign currency monetary items outstanding at
must be deferred and included in the
the reporting date must be translated at the spot
measurement of the purchases or sales.
rate at the reporting date. Other items outstanding
at the reporting date must not be retranslated Other costs or gains on entering the hedging
subsequent to the initial recognition of the transactions must be deferred and recognised as
transaction. assets or liabilities and amortised as expenses or
revenues in net profit or loss/result over the lives
Exchange differences must be recognised as
of the hedging transactions.
revenues or expenses in net profit or loss/result in
the reporting period in which the exchange rates
change, except that:
a when an exchange difference arises in respect
of a foreign currency monetary item which is
directly attributable to the acquisition,
construction or production of a qualifying asset,

38
Early Termination of Foreign Currency The financial reports of an integrated foreign
Hedges operation must be translated as at the reporting
date using the temporal method and any exchange
If a hedge of an anticipated purchase or sale is
differences must be recognised as revenues or
terminated early, and the anticipated transaction is
expenses in net profit or loss/result in the
still expected to occur as was specified when the
reporting period in which they arise.
hedge was designated, the deferred gains or losses
that arose on the hedge prior to its termination
must continue to be deferred and then included in Reclassification of Foreign Operations
the measurement of the purchase or sale when it When a foreign operation ceases to be an
takes place. integrated foreign operation and the current rate
If a hedge of an anticipated purchase or sale is method is to be applied instead of the temporal
terminated early and the anticipated transaction is method, exchange differences arising from
no longer expected to occur as was specified when translating non-monetary assets and liabilities at
the hedge was designated, the deferred gains or the current rate at the date of reclassification
losses that arose on the hedge prior to its instead of at the historical rates must be recognised
termination must be recognised as a revenue or an directly in the foreign currency translation reserve
expense in net profit or loss/result as at the date of within equity.
termination. When a foreign operation ceases to be a self-
sustaining foreign operation and the temporal
Hedges of Net Investments in Self-Sustaining method is to be applied instead of the current rate
Foreign Operations method, the translated amounts of non-monetary
assets at the date of reclassification must be
Exchange differences arising from a hedge of a regarded as the costs of those assets for the
monetary item forming part of the net investment purposes of applying the temporal method.
in a self-sustaining foreign operation must be
recognised as a revenue or an expense in net profit
or loss/result in the reporting period in which the Disposal of a Foreign Operation
exchange rates change. To the extent that the net On the disposal, or partial disposal, of a self-
investment is hedged, on incorporation of the sustaining foreign operation or an integrated
foreign operation into the entity’s financial report foreign operation previously classified as a self-
the exchange differences arising from the hedge sustaining foreign operation, that part of the
must be eliminated against the foreign currency balance of the foreign currency translation reserve
translation reserve, together with any income tax which relates to the disposal, or partial disposal,
expense (income tax revenue) arising from such must be transferred to retained profits (surplus) or
differences. accumulated losses (deficiency) by the entity in the
reporting period in which the disposal, or partial
Translation of Financial Reports of Foreign disposal, is recognised.
Operations
The financial reports of a self-sustaining foreign Disclosure Requirements
operation must be translated as at the reporting The financial report must disclose the amount of
date using the current rate method and any the net exchange difference and gain or loss
exchange differences must be recognised directly recognised as either a revenue or an expense in net
in the foreign currency translation reserve within profit or loss/result for the reporting period.
equity and retained in the foreign currency
translation reserve until the disposal, or partial
disposal, of the foreign operation.

39
When there is a change in the classification of a Discounts on acquisition should be accounted for
foreign operation from self-sustaining to integrated by reducing proportionately the fair values of the
or from integrated to self-sustaining, the financial non-monetary assets acquired until the discount is
report must disclose: eliminated. Where, after reducing the recorded
amounts of the non-monetary assets acquired to
a the nature of the change in classification;
zero, a discount balance remains it must be
b the reason for the change; recognised as revenue in net profit or loss for the
c the net impact on equity of the change in reporting period.
classification; and
On acquisition of a subsidiary, the accounting
d the financial effect on the statement of financial treatment for purchased goodwill (including any
performance for the current and preceding amortisation thereof) and discount on acquisition
reporting periods had the change in
must be effected as an adjustment in the
classification occurred at the beginning of the
consolidated financial statements and not in the
preceding reporting period.
subsidiary’s or parent entity’s financial statements.
An entity incorporating in its financial report a self-
sustaining foreign operation which reports to the Where there is a subsequent change in the cost of
parent entity in the currency of a hyperinflationary acquisition or additional assets or liabilities are
economy must disclose, as a result of the identified, an adjustment shall be made to goodwill
restatement of the financial report of the self- or discount on acquisition.
sustaining foreign operation: Internally generated goodwill should not be
a the gain or loss on net monetary items; recognised in the financial statements and
purchased goodwill cannot be revalued.
b the identity and level of the general price level
index at the reporting date; and
c the movement in the general price level index Disclosure Requirements
during the reporting period. The financial report must disclose:
a unamortised balance of goodwill;
AASB 1013: Accounting for b amount of goodwill amortised during the
Goodwill (AAS 18) financial year; and
c period over which goodwill is being amortised.
Accounting Requirements
Purchased goodwill is measured as the excess of AASB 1014: Set–Off and
purchase consideration plus incidental expenses
Extinguishment of Debt (AAS 23)
over the fair value of the identifiable net assets
acquired. Where the amount so calculated does not
represent future benefits from unidentifiable Defeasance
assets, it is not goodwill and should be written off A debt will be treated as extinguished when settled
immediately. through repayment, legal defeasance or in-
substance defeasance.
Goodwill must be amortised on a straight line basis
over a period of time (not exceeding 20 years) “Defeasance” means the release of a debtor from
during which the benefits are expected to arise. the primary obligation for a debt.
The unamortised balance of goodwill must be “Legal defeasance” occurs when the release of the
reviewed at each reporting date and written down debtor from the primary obligation is either
to the extent that future benefits are no longer acknowledged formally by the creditor or by a duly
probable. In addition, the period over which appointed trustee of the creditor, or established by
goodwill is amortised must be reviewed at each legal judgement.
reporting date and, if necessary, adjusted to reflect
the amount and timing of future benefits (not
exceeding 20 years).

40
“In-substance defeasance” occurs through placing b details of any amounts defeased which are
in trust assets adequate to meet the servicing outstanding, and of any outstanding guarantees
requirements (both interest and principal) of a debt or indemnities given by or on behalf of the
or by having a risk–free entity assume debtor.
responsibility for those servicing requirements.

For a debt to be extinguished through defeasance, AASB 1015: Acquisition of Assets

it must be highly improbable that the debtor will be (AAS 21)
required to assume again the primary obligation of
the debt.
Measurement of Acquired Assets
Where the carrying amount of an asset given up in
Where there is an acquisition, the acquired assets
defeasance of a debt differs from the carrying value
must be measured at the acquisition date at the
of the liability, the difference is recognised in net
cost of acquisition.
profit or loss at the time of the defeasance.
Where an entity or operation is acquired, the
When the conditions for an effective defeasance
identifiable assets acquired (and, where applicable,
cease to be met, the remaining original debt is to
identifiable liabilities assumed) must be measured
be restated in the statement of financial position.
at the acquisition date at their fair values as at the
For an in-substance defeasance employing a trust,
acquisition date. Any difference between the cost of
the related assets remaining in the trust are also to
acquisition and the aggregate of the fair values of
be restated.
the identifiable assets acquired (less, where
applicable, the aggregate of the fair values of the
Set–off identifiable liabilities assumed) must be accounted
for in accordance with Accounting Standard AASB
An asset and a liability must be set off and the net
1013 “Accounting for Goodwill”.
amount recognised in the statement of financial
position when, and only when, the entity:
Reconstructions within an Economic Entity
a has a legally recognised right to set off the asset
and the liability; and On 17 February 2000, the Senate disallowed
b intends either to settle on a net basis, or to paragraphs 6.3 and 6.4 of AASB 1015 relating to
realise the asset and settle the liability reconstructions within an economic entity. As an
simultaneously. alternative to the fair value basis of measurement,
the disallowed paragraphs permitted the acquirer
A “right of set–off” means a right which:
to measure assets acquired at their carrying
a allows the entity to offset the amount owed to amounts determined in accordance with
one entity against the amount owed by that or Accounting Standards immediately prior to the
another entity; and reconstruction.
b is recognised at law.
Deferred Settlement
Disclosure Requirements
Where settlement of all or any part of any cash
The financial report must disclose: consideration to be given in an acquisition is
deferred, the fair value of the cash consideration
a in the period in which defeasance takes place:
must be determined by discounting the amounts
i aggregate carrying amount of assets given up payable to their present value as at the acquisition
for purpose of defeasance; date.
ii aggregate carrying amount of debt
extinguished; and
iii net gain or loss on defeasance; and

41
The discount rate used to determine the present Where an acquisition that results in control of an
value of the cash consideration must be the entity’s entity or operation being obtained occurs after the
incremental borrowing rate, being the rate reporting date but before the time of completion of
applicable to the entity if finance for the acquisition the financial report, the following information
were obtained from an independent financier must be disclosed:
under comparable terms and conditions to those in
a the name and a description of the entity or
the purchase agreement.
operation acquired;
b the acquisition date ;
Contingent Future Events
c where applicable, the percentage of voting shares
Where it is probable that the cost of acquisition will acquired; and
vary because it is contingent on one or more future
d the cost of acquisition and a description of the
events and the amount of the variation can be components of the cost of acquisition.
reliably measured at the acquisition date, the
amount of the variation must be included in the Where an acquisition that results in control of an
cost of acquisition. Where the amount of the entity or operation being obtained occurs after the
variation cannot be reliably measured at the reporting date but before the time of completion of
acquisition date, the cost of acquisition must be the financial report, the following information
adjusted when the amount of the variation can be must be disclosed unless it is impracticable to do
reliably measured. so:
a any entities or operations disposed of, or that
Costs of Issuing Equity Instruments will be disposed of, as a result of the acquisition;
and
Transaction costs arising on the issue of equity
b the nature and amount of any provisions for
instruments must be recognised by the issuer of
restructuring, including provisions for plant
those equity instruments directly in equity.
closure, that arise as a result of the acquisition.
Where it is impracticable to disclose this
Disclosure Requirements information, that fact must be disclosed.
Where an acquisition results in the entity obtaining
control of another entity or operation, the following
must be disclosed: AASB 1016: Accounting for
a the name and a description of the entity or
Investments In Associates
operation acquired; (AAS 14)
b the acquisition date;
c any entities or operations disposed of, or that Accounting Requirements
will be disposed of, as a result of the acquisition; “Associate” means an investee, not being a
d where applicable, the percentage of voting shares subsidiary or partnership of the investor or an
acquired; investment acquired and held exclusively with a
e the cost of acquisition and a description of the view to disposal in the near future, over which the
components of the cost of acquisition; and investor has significant influence (ie. the capacity
to effect substantially the financial and/or
f the nature and amount of any provisions for
operating policies of an investee).
restructuring, including provisions for plant
closure, that arise as a result of the acquisition
and which are recognised as at acquisition date.

42
The equity method of accounting must be used to accounting, cross-holdings, changes in investor’s
measure the carrying amount of investments in ownership interest and transitional provisions for
associates, except where the net market value the first year of application.
method (ie. mark to market) has been adopted in
accordance with another Accounting Standard. The Disclosure Requirements
equity method of accounting is applied to the
consolidated financial statements (not the The investor shall disclose in aggregate, for all
parent/company column). Investments in equity accounted investments in associates, each of
associates are recognised in the parent entity the following items:
financial statements using the historical cost a investor’s share of the associates’ profit from
method. However, if an investor does not prepare ordinary activities before income tax, income tax
consolidated financial statements, the equity relating to ordinary activities and extraordinary
method of accounting is applied to the single entity items (net of income tax);
financial statements.
b investor’s share of retained profits/accumulated
The equity accounted amount of an investment in losses and other reserves at the beginning and
an associate is increased/decreased by the: end of the reporting period;
c a schedule setting out the movements in the
a investor’s share of any post acquisition
carrying amount of investments in associates,
profit/loss in relation to the financial year after
separately identifying the carrying amount as at
adjustments for distributions to preference
the beginning and end of the reporting period,
equityholders, depreciation and amortisation
and the amounts of new investments, disposals,
adjustments arising on acquisition, dissimilar
share of profit/loss, dividends and other
accounting policies and certain inter-entity
movements;
transactions (recognised in the investor’s profit
and loss); d the financial effect of events or transactions
which have occurred after the reporting date of
b dividends received or receivable from the
an associate which could materially affect the
associate; and
financial position or operating performance of
c investor’s share of post acquisition that associate for the next reporting period; and
increments/decrements in the associate’s total
e where adjustments to eliminate the effect of
reserves in relation to the financial year, to the
dissimilar accounting policies cannot be made,
extent that the amounts of these movements
the nature of the dissimilarities.
have not been recognised previously in net profit
or loss of the associate, or otherwise reflected in In addition, the investor shall disclosure:
the carrying amount of the investment a for each investment in an associate:
(recognised in the investor’s reserves).
i name and principal activities;
However, the carrying amount of the investment ii investor’s ownership interest;
must not exceed its recoverable amount, with any
iii investor’s voting power;
write-downs recognised in net profit or loss for the
reporting period. The write-down must be reversed iv the carrying amount of the investment; and
in subsequent years to the extent that recoverable v reporting date of the associate;
amount, at the subsequent reporting date, exceeds b the amount of the investor’s share of associates’
the written-down carrying amount. contingent liabilities, capital commitments
contracted for and other expenditure
The Standard also prescribes accounting
commitments contracted for, other than for the
methodology to be applied in the event of an
supply of inventories;
investee becomes an associate subsequent to initial
acquisition, dissimilar accounting policies, c the amount of the investor’s contingent liabilities
that arise because the investor is severally liable
different balance dates, inter-entity transactions,
for all the liabilities of an associate;
discontinuation of the equity method of
d where there are crossholdings, the percentage of
equity held by the associate; and

43
e where investments in associates, either 3 Aggregate of loans in existence at the reporting
individually or in aggregate, are material to an date, guaranteed or secured by the reporting
evaluation of the operating performance and entity to directors of the reporting entity or of
financial position of the investor, a summarised any entity identified as a related party, and the
presentation of the recognised amounts of spouses or relatives of such directors.
assets, liabilities and profit or loss of associates, Where such loans are in existence at the
either individually or in aggregate, as reporting date, the aggregate amounts advanced
appropriate. and repayments received during the financial
year in relation to such loans, and the names of
AASB 1017: Related Party the directors concerned must also be disclosed.
4 Information in relation to the aggregate number
Disclosures (AAS 22) of shares, units, options and other equity
instruments acquired and/or disposed during
Key Definitions the financial year, and held as at the reporting
A “related party” is widely defined and includes any date, by directors of the reporting entity and
other entity that, at any time during the financial their director-related entities in any entity in the
economic entity.
year:
5 The financial statements shall disclose the
a has control or significant influence over the following information, showing separately
entity; transactions with:
b is subject to control or significant influence by • Directors or director-related entities;
the entity;
• Related parties in a wholly-owned group; and
c is controlled by the same entity that controls or
• Other related parties
significantly influences the entity; or
a Where there have been transactions with
d is significantly influenced by the same entity that
related parties:
controls the entity.
i each different type of transaction;
“Related party” also includes:
ii nature of terms and conditions of each
e any director of the entity, or any of their director- different type of transaction; and
related entities; or
iii for each combination of type of transaction
f any director of any other entity identified as a and nature of terms and conditions
related party under any of paragraphs (a) to (d), involving:
or any of their director-related entities.
- directors or director-related entities:
A “director-related entity” means, in relation to . the name of the directors concerned;
particular directors, spouses, relatives of directors and
or spouses, and any entity under the joint or
. the aggregate amount recognised in the
several control, or significant influence of such
financial statements;
directors, spouses or relatives.
- related parties in the wholly-owned group
(amounts recognised in the financial
Materiality statements do not require disclosure);
Director-related disclosures required by this - other related parties:
Standard are deemed material regardless of the . the classes of related parties involved,
quantum of the amounts involved. class determined on basis of related
party relationship; and
Disclosure Requirements . the aggregate amount recognised in the
financial statements (individual
1 Names of directors in office at any time during material transactions should be
the financial year. disclosed separately).
2 Directors’ remuneration and retirement benefits.

44
 b Aggregate of the following transactions with Disclosure by General Description
each class of related party:
Transactions with and amounts receivable from
i interest revenue; and payable to:
ii dividend revenue;
a directors of the entity or their director-related
iii interest expense; and
entities; and
iv provision for doubtful receivables and
b directors of related parties or their director-
writedowns of receivables;
related entities,
c The aggregate amounts of debts other than
which:
trade debts, classified into current and non-
current, due and receivable from and payable i occur within a normal employee, customer or
to: supplier relationship on terms and conditions no
i in respect of balances with entities within more favourable than those which it is
the wholly-owned group: reasonable to expect the entity would have
adopted if dealing with the director or director-
- the ultimate parent entity within the
related entity at arm’s length in the same
wholly-owned group; and
circumstances;
- any wholly-owned subsidiaries of that
ii do not have the potential to adversely affect
parent entity;
decisions about the allocation of scarce resources
ii in respect of balances with other related made by users of the financial statements, or the
parties: discharge of accountability by the directors, if
. the ultimate parent entity of the reporting disclosed in the financial statements by general
entity; description; and
. any subsidiary of the ultimate parent iii are trivial or domestic in nature,
entity; and
are excluded from the disclosure requirements of
. any other related party; paragraphs 5(a) to (f). Such transactions shall be
d Aggregate amounts receivable from or disclosed in the financial statements by general
payable to each class of related party, description.
classified into current and non-current;
e Aggregate amount of provision for doubtful Disclosure of Controlling Entities
receivables from related parties, classified into
current and non-current; and The identity of the ultimate holding company or
f The percentage of equity interest held in each controlling business undertaking in the wholly-
related party, directly and indirectly, in the owned group and, if different, the identity of the
form of: ultimate Australian holding company or controlling
business undertaking and, if different, the identity
i shares;
of the ultimate holding company.
ii units;
iii share options;
iv unit options; and AASB 1018: Statement of
v other equity instruments, classified by Financial Performance
nature.
This Standard applies to each entity that is required
Consolidated Financial Statements to prepare a financial report under Chapter 2M of
Where consolidated financial statements are the Corporations Act 2001.
prepared for an economic entity, the disclosure
requirements of paragraphs 5(a) to (f) do not apply
in respect of those transactions between a parent
entity and its subsidiaries or between subsidiaries
that have been eliminated for consolidation
purposes.

45
Prescribed Format Significant Items
The Standard prescribes the basic format of the When a revenue or an expense from ordinary activities
statement of financial performance, including the is of such a size, nature or incidence that its disclosure
disclosure on the face of the statement of financial is relevant in explaining the financial performance of the
performance of: entity for the reporting period, its nature and amount
must be disclosed separately either on the face of the
a revenues and expenses arising from ordinary
statement of financial performance or in the notes to the
activities;
financial report.
b the net amount of extraordinary items;
c revenues, expenses and valuation adjustments
Extraordinary Items
recognised directly in equity; and
Revenues and expenses recognised in net profit or loss
d additional line items, sub-headings and
sub-totals. must be classified as having arisen from ordinary
activities, unless they are considered to be extraordinary
items.
Classification and Disclosure of Expenses
Expenses arising from ordinary activities are to be An item can only be regarded as extraordinary where it
classified either all by nature (eg. depreciation, is outside the ordinary activities of the entity and is not
employee entitlements) or all by function (eg. cost of a recurring nature.
of goods sold, administration expenses) and each “Ordinary activities” is defined as “activities that are
class must be disclosed either on the face of the undertaken by an entity as part of its business or to meet
statement of financial performance or by way of its objectives and related activities in which the entity
note to the financial statements. The commentary engages in furtherance of, incidental to, or arising from
to the Standard encourages each class of expense to activities undertaken to meet its objectives”.
be presented on the face of the statement of
financial performance. Where disclosure is made
Additional Line Items, Sub-headings and
in the notes to the financial report, the standard
requires a reconciliation between the expenses Sub-totals
disclosed on the face of the statement of financial Additional line items, sub-headings and sub-totals must
performance and the classification of expenses by be separately disclosed when required by a Standard or
nature or by function disclosed in the notes. when necessary for an understanding of an entity’s
financial performance, provided that:
In addition, the standard clarifies that regardless of
whether expenses are classified all by nature or all a any such sub-totals are presented before sub-totals
by function, the notion of materiality in Accounting required to be presented by AASB 1018;
Standard AASB 1031 and Australian Accounting b any such sub-totals are presented less prominently
Standard AAS 5 “Materiality” applies to the than sub-totals required to be presented by AASB
classification of expenses. Each material class 1018; and
should be separately disclosed and hence, it follows
c a sub-total referring to profit or loss/result is not
that the total of unclassified expenses is unlikely to presented immediately before the items required to be
exceed 10 per cent of total expenses. disclosed by paragraph 5.4 (paragraph 5.4 relates to
Where revenue from the sale of goods is disclosed disclosure of specific revenue and expenses that are
in the financial report in accordance with the significant).
disclosure requirements of AASB 1004/AAS 15
“Revenue”, the cost of sales relating to the sale of Revision of Accounting Estimates
those goods must also be disclosed. This disclosure Where the revision in an accounting estimate affects the
of cost of sales must be made irrespective of current reporting period only, the effect of the revision
whether expenses are disclosed by way of nature or must be recognised as revenue or an expense in the
function in accordance with other requirements of statement of financial performance in the reporting
the Standard. period in which the accounting estimate is revised.

46
Where the revision in an accounting estimate c in the notes to the financial report, restated
affects both the current and future reporting comparative financial information (where
periods, the effect of the revision must be practicable only) and the amount of the
recognised as revenue or an expense in the correction of the fundamental error relating
statement of financial performance in the reporting to prior reporting periods.
period of the revision and in future reporting
periods.
AASB 1019: Inventories (AAS 2)
Accounting estimates recognised in prior reporting This Standard does not apply to inventories that:
periods must not be revised with retrospective
effect to prior reporting period financial a are self-generating and regenerating assets;
statements. The commentary to the revised b arise under construction contracts and are
Standard indicates that retrospective adjustment is accounted for under AASB 1009; or
not considered appropriate on the basis that a c are financial instruments.
revision of an accounting estimate is not an error,
and accordingly cannot bring the adjustment Inventory Measurement
within the definition of a fundamental error.
Inventories are to be valued at the lower of cost and
net realisable value. Cost of inventories is
Errors Made in Prior Periods
determined using full absorption costing and costs
An error made in a prior reporting period must be shall be assigned using one of the following
corrected in the reporting period in which the error methods:
is discovered unless the entity has amended and
a specific identification;
reissued the financial report relating to the prior
reporting period. Where the correction of an error b average cost (weighted); or
gives rise to revenue or an expense, that revenue or c first in and first out (FIFO).
expense must be recognised in the statement of Standard costs may only be used, to determine the
financial performance in the reporting period in cost of inventories, where such standard costs are
which the error is discovered. realistically attainable and are reviewed regularly.
At year end it may be necessary to adjust
Fundamental Errors inventories for a proportion of cost variances
caused by significant changes in assumptions
“Fundamental errors” are defined as “material
underlying the standards.
errors discovered in the current reporting period
such that the financial report of one or more prior
reporting periods cannot now be considered to Disclosure Requirements
have been reliable at the dates of their issue”. The financial statements shall disclose:
Fundamental errors must be corrected in the a the accounting policies adopted for measuring
reporting period in which they are discovered inventories, including the method or methods
unless the entity has amended and reissued the used to assign costs;
financial report relating to the prior reporting
b the aggregate carrying amount of inventories;
period.
c the carrying amount of inventories classified as
Where a fundamental error has been corrected in current and non-current assets and further sub-
the current reporting period, the financial report classified in a manner appropriate to the entity’s
must disclose: operations;
a the nature of the fundamental error; d the carrying amount of inventories in each of the
sub-classifications that have been measured at
b on the face of the statement of financial
net realisable value;
performance as a separate line item, the revenue
or expense arising from the correction of the e the aggregate write-downs and other losses
fundamental error and the related income tax recognised as an expense;
expense; and

47
f the aggregate reversals of write-downs A PDIT shall be offset against a FITB to the extent
recognised as a reduction of an expense; the tax is likely to become payable in the period the
g the circumstances or events that led to the FITB is expected to become realisable. However,
reversal of write-downs of inventories; and the PDIT of one company cannot be offset against
the FITB of another on consolidation.
h the carrying amount of inventories pledged
specifically and separately from the other assets Allowance should be made for overseas
of the entity as security for liabilities, and the withholding tax in relation to profits and reserves
nature of the security. of branch operations or subsidiaries, unless it is
intended to leave those profits and reserves
AASB 1020: Accounting for indefinitely with the branch or subsidiary.

Income Tax (Tax–effect The FITB and PDIT should be adjusted for
changes in tax rates with a corresponding entry to
Accounting) (AAS 3) profit and loss.

Key Definitions
Disclosure Requirements
“Income tax expense” means the amount of
The financial reports must disclose:
income tax which would be payable on the pre-tax
accounting profit adjusted for permanent a the general nature of material permanent
differences. differences and their effect on the income tax
expense (by way of note);
“Income tax payable” means the amount of income
tax calculated on the taxable income of the b any part of a FITB carried forward attributable to
company for the financial period. income tax losses;
c the extent to which the PDIT has been reduced
“Timing differences” are items by FITBs attributable to tax losses; and
assessable/deductible for tax purposes in a
d the extent to which a FITB attributable to
different period than that for accounting purposes.
income tax losses has not been recognised as an
asset or as a reduction in the PDIT and where
Determination of FITB and PDIT there is a possibility that such losses will be
A Provision for Deferred Income Tax (PDIT) is recouped, a statement that the benefit will only
be obtained if:
caused by expense items presently deductible for
tax purposes but deferred for accounting purposes, i the company derives future assessable
and/or revenue item currently non-assessable for income of a nature and of an amount
tax purposes but included for accounting purposes. sufficient to enable the benefit from the
deductions for loss to be realised;
Future Income Tax Benefits (FITB) are caused by
ii the company continues to comply with the
revenue items currently assessable for tax purposes conditions for deductibility imposed by tax
but deferred for accounting purposes and/or legislation; and
expense items currently expensed for accounting
iii no changes in tax legislation adversely affect
purposes but presently non-deductible for tax
the company in realising the benefit from the
purposes.
deductions for the loss.
FITBs in respect of timing differences should only
be carried forward as an asset where realisation of
the benefit can be assured beyond reasonable
doubt. A FITB in respect of tax losses should not
be carried forward as an asset unless realisation of
the benefit is virtually certain.

48
Revised Standard AASB 1020 “Income Tax Bases
Taxes“ (AAS 3) The tax base of an asset is calculated as the asset’s
A revised version of AASB 1020 “Income Taxes” carrying amount at reporting date less any future
was issued in December 1999 and was initially assessable amounts plus any future deductible
required to apply to half-years ending on or after amounts that are expected to arise from recovering
31 December 2002 and financial years ending on the asset’s carrying amount as at the reporting date.
or after 30 June 2003. In November 2002, AASB
The tax base of a liability is calculated as the
1020B “Amendments to Accounting Standard
liability’s carrying amount at reporting date less
AASB 1020 and Australian Accounting Standard
any future deductible amounts and plus any
AAS 3” was issued which amended the application
assessable amounts that are expected to arise from
date of AASB 1020 to half-years ending on or after
settling the liability’s carrying amount as at the
30 June 2005 and financial years ending on or after
reporting date. Where the liability is in the nature
31 December 2005.
of “revenue received in advance”, the tax base of
The revised Standard adopts the comprehensive the liability is calculated as the liability’s carrying
balance sheet method of accounting for income amount less any amount of the revenue received in
taxes, which is a significant change from the “profit advance that has been included in assessable
and loss” or “income statement” method adopted amounts in the current or previous reporting
by the superseded Standard. period.

The main features of the revised Standard are as

follows: Temporary Differences
Temporary differences arise from differences
Key Definitions between the carrying amount and tax base of assets
and liabilities. Temporary differences are either
“Current tax” means the amount of income taxes assessable or deductible depending upon whether
payable (recoverable) in respect of the taxable they increase or decrease taxable income in the
amount (or recoverable from a tax loss) for a future. Where the carrying amounts of assets and
reporting period liabilities in the statement of financial position are
“Deferred tax” means changes in the deferred tax greater than their respective tax bases, realising
liability or asset that occur in a reporting period assets would lead to assessable temporary
(other than those arising from the translation of differences and settling liabilities would lead to
deferred tax balances of foreign operations, which deductible temporary differences. Where the
are treated in accordance with AASB 1012 “Foreign carrying amounts of assets and liabilities in the
Currency Translation”). statement of financial position are less than their
respective tax bases, realising assets would lead to
“Deferred tax asset” means the amount of income deductible temporary differences and settling
tax recoverable in future reporting periods. liabilities would lead to assessable temporary
“Deferred tax liability” means the amount of differences.
income tax to be settled in future reporting periods.
Current Tax Balances – General Principles
“Tax base” means the amount attributed to an asset
or a liability for tax purposes. Current tax is the amount of tax paid or payable to
tax authorities for each period. The current tax
“Temporary difference” means the difference
liability is generally equivalent to the provision for
between the carrying amount of an asset or a
income tax recognised in the superseded AASB
liability in the statement of financial position and
1020 “Accounting for Income Tax (Tax–effect
its tax base.
Accounting)”.

49
Measurement of Current Tax Balances Recognition of Deferred Tax Balances
Current tax liabilities and assets are measured at Deferred tax assets arising from deductible
nominal amounts expected to be paid or recovered temporary differences and unused tax losses are
using the tax rates and laws that have been enacted recognised in the statement of financial position to
or substantively enacted by the reporting date, the extent, and only to the extent, it is probable that
except where another Standard requires or permits future taxable amounts within the entity will be
a different measurement method to be adopted. available against which these deductible temporary
differences or unused tax losses can be utilised.
Recognition of Current Tax Balances Deferred tax liabilities arising from all assessable
temporary differences are recognised in the
To the extent that it is unpaid, current tax for the statement of financial position.
current and prior reporting periods must be
recognised as a liability. Where payments already
Other Requirements
made exceed current tax payable, the recoverable
excess must be recognised as an asset. The revised Standard also contains extensive
requirements and guidance in relation to the
Current tax expense or revenue must be recognised
following matters:
in the profit or loss, except where it relates to an
item recognised directly in equity or arises on a the circumstances whereby current and deferred
acquisition. tax arising in an accounting period must be
directly debited or credited to equity;
Deferred Tax Balances – General Principles b the calculation and recognition of deferred tax
balances relating to:
In accordance with the revised Standard, the future
i fair value adjustments on the acquisition of
tax consequences of transactions and other events
an entity or operation;
recognised in the entity’s statement of financial
position give rise to deferred tax assets and ii assets that are revalued;
liabilities. Deferred tax assets and liabilities are iii acquisition of goodwill;
calculated by multiplying temporary differences iv initial recognition of assets and liabilities;
with the relevant tax rates. Deferred tax assets may v investments in subsidiaries, branches,
also arise from unused tax losses, measured with associates and joint ventures;
reference to the relevant tax rates.
vi translation of integrated foreign operations;
and
Measurement of Deferred Tax Balances vii initial recognition of compound financial
Deferred tax assets and liabilities must be instruments; and
measured at the tax rates expected to apply to the c the presentation of current and deferred tax
reporting period or periods in which the assets will balances in the statement of financial position,
be recovered or the liabilities settled, based on tax including the circumstances in which such
rates that have been enacted or substantively balances may be set-off.
enacted by the reporting date.

50
AASB 1021: Depreciation (AAS 4) Disclosure Requirements
In the statement of financial position, accumulated
Bringing to Account the Depreciable depreciation should be deducted from the asset or
Amount class to which it relates.
Depreciable assets should be depreciated by means For each class of depreciable asset, the financial
of a systematic charge over their estimated useful report must disclose:
lives, commencing from the time they are put into
a the depreciation methods used;
use or held ready for use. Depreciation rates should
be reviewed annually, having regard to expected b the useful lives or the depreciation rates used;
useful lives. c the aggregate amount of depreciation allocated,
whether recognised as an expense or as part of
“Useful life” means the period of time (or
the carrying amounts of other assets during the
estimated total service in terms of units of financial year; and
production) in which the benefits embodied in a
depreciable asset are expected to be consumed or d the gross amount of depreciable assets and the
related accumulated depreciation.
obtained by the entity.
Where the depreciation charges for any financial
Cost (or revalued amount) should be apportioned period have changed materially because of:
between freehold land and any buildings thereon.
That part relating to buildings must be depreciated. a re-assessment of useful lives;
Leasehold improvements should be depreciated b changes in depreciable amounts caused by a
over the unexpired lease period or useful lives of revaluation of the asset; or
the improvements, whichever is the lesser. c changes in depreciable amounts following a re-
appraisal of net amounts expected on disposal,
Changes to Depreciation Rates and the financial report shall disclose the financial
Methods effect of that change.
Consistent with AASB 1001, where there is a
When depreciation rates or methods are changed,
change in a depreciation method which has or will
the change must be accounted for as a change in
have a material effect on the financial statements,
accounting estimate. Where depreciation rates or
the nature of the change, the reason for the change
methods are changed, the net written down value
and its financial effect must be disclosed.
of the asset is simply depreciated from the date of
change in accordance with the new depreciation
rate or method. Depreciation recognised in prior
AASB 1022: Accounting for the
financial years must not be changed (i.e. the
change in depreciation rate or method must be Extractive Industries (AAS 7)
accounted for on a prospective basis).
Accounting Requirements
Retirement or Disposal of Depreciable Costs arising from exploration and evaluation of an
Assets area of interest shall be written off as incurred,
except that they may be carried forward if either:
The gain or loss on the disposal or retirement of a
depreciated asset must be recognised in net profit a the costs are expected to be recouped through
or loss for the reporting period and is calculated as successful development and exploitation; or
the difference between: b exploration and evaluation activities have not
a accumulated depreciation and cost (or revalued reached a stage which permits a reasonable
amount); and assessment of the existence or otherwise of
economically recoverable reserves and active and
b any proceeds on disposal.
significant operations in the area are continuing.

51
Development costs shall be carried forward to the e development costs carried forward with
extent they are expected to be recouped through explanation that amortisation is not being
successful exploitation of an area of interest or its charged pending commencement of production;
sale. Construction costs for facilities in the nature f costs carried forward in areas where production
of depreciable assets are to be accounted for in has commenced less accumulated amortisation;
accordance with AASB 1021. and
When an area of interest is abandoned all carried g government subsides received/receivable and
forward costs must be written off. any circumstances in which they may become
repayable.
Carried forward costs are to be amortised over the
life of the area of interest (ie period in which
economically recoverable reserves in area of AASB 1023: Financial Reporting
interest are expected to be depleted or period of of General Insurance Activities
lease or permit, whichever is less) on a production
(AAS 26)
basis, unless a time usage basis is more
appropriate. Amortisation is to be reviewed This Standard only applies to the general insurance
annually with regard to economically recoverable activities and does not apply to accounting for life
reserves and development costs still to be incurred. insurance, medical benefits insurance or self-
insurance.
Cost of restoration work necessitated by a
particular phase shall be provided for at the time of
such activities and shall form part of the cost of Premiums
that respective phase. Premium revenue must be recognised from the
Inventories shall be recognised in the financial attachment (acceptance of risk) date as soon as the
statements at the earliest stage at which materials amount of the premium can be reliably measured.
representing, or expected to be converted by Premium revenue must be recognised in
further processing to, a saleable product can be accordance with the pattern of the incidence of risk
measured with reliability and the quantities of such or, where the result will not be materially different,
materials can be determined by physical evenly over the period of the policy (for direct
measurement or reliable estimate. insurance) or period of indemnity (for
Sales revenue should not be recognised until the reinsurance).
product is in its final form, has been delivered and
all risks of ownership have passed from the vendor. Claims
Proceeds of sale dependent on assays or tests after
Outstanding claims shall be recognised as a
delivery are to be recognised using the most
liability for both direct business and inwards
reliable estimates available.
reinsurance business and must be measured as the
present value of the expected future payments.
Disclosure Requirements
The financial report must disclose: Assets
a exploration, evaluation and development costs Investments, that are integral to the general
written off; insurance activities, must be measured at net
b amortisation charge of exploration, evaluation market values as at the reporting date. Any
and development costs carried forward; increments or decrements in value must be
recognised as revenues or expenses in net profit or
c government royalties paid/payable on sales or
loss for the reporting period. Land and buildings
production;
must be accounted for as investments and the
d costs carried forward in relation to revaluation and depreciation requirements of
exploration/evaluation with explanation that Accounting Standards AASB 1041 and AASB 1021
costs will only be recouped on successful do not apply to such investments.
exploitation or sale of the area;

52
Assets other than investments (operating assets) ii the amount by which deferred acquisition
that are integral to the general insurance activities costs have been written down during the
are to be measured at the lower of cost and financial year to recoverable amount due to
recoverable amount, subject to the requirements of the insurer experiencing an unprofitable
accounting standards AASB 1010 and AASB 1021. aggregate portfolio of insurance business, and
the circumstances surrounding that
unprofitable business; and
Other Accounting Requirements
iii the underwriting result for the financial year,
The Standard also specifies the accounting determined as the amount obtained by
methods for levies and charges, reinsurance deducting the sum of claims expense,
premiums, portfolio transfers and underwriting outwards reinsurance premium expense and
pools and co-insurance. The transitional provisions underwriting expenses from the sum of direct
of the Standard permit adjustments to retained and inwards reinsurance premium revenues
profits or accumulated losses at the beginning of and recoveries revenue;
the reporting period. c net claims incurred, showing separately the
amount relating to risks borne in the current
Disclosure Requirements financial year and the amount relating to a
reassessment of risks borne in all previous
The Standard specifies numerous detailed financial years, and the components:
disclosure requirements. The main requirements i gross claims incurred (undiscounted);
are:
ii reinsurance and other recoveries
a in the statement of financial position, disclosure (undiscounted); and
of the following items, classified into current iii discount movements shown separately for
and non-current categories: claims and reinsurance; and
i investments by class of investments; d segment information in accordance with
ii operating assets by class of asset; Accounting Standard AASB 1005 “Segment
iii deferred acquisition costs; Reporting”.
iv reinsurance and other recoveries receivable;
v liability for outstanding claims; and AASB 1024: Consolidated
vi unearned premiums. Accounts (AAS 24)
b in the statement of financial performance,
disclosure of: Preparation of Consolidated Financial
i the following items of revenue or expense: Statements
– direct premium revenue; Consolidated financial statements are prepared by
– inwards reinsurance premium revenue combining the financial statements of the parent
(including retrocessions); entity and each of its subsidiaries, where “Parent
– reinsurance and other recoveries revenue; entity” means an entity which controls another
– investment revenue and expense, and its entity, and “Subsidiary” means an entity which is
individual components; controlled by a parent entity.
– direct claims expense; Therefore, the concept of “control” is the basis for
– reinsurance claims expense; determining what entities should be consolidated,
– outwards reinsurance premium expense where “Control” is defined as the capacity of an
(including retrocessions); and entity to dominate decision making, directly or
– acquisition costs expense;
indirectly, in relation to the financial and operating
policies of another entity so as to enable the other
entity to operate with it in pursuing the objectives
of the controlling entity.

53
Subsidiaries are to be included in the consolidated The consolidated statement of financial performance
financial statements of the economic entity as from disclose separately the portion of net profit of the
the date on which the parent entity obtains control of economic entity attributed to outside equity interests.
each of the subsidiaries until such time as the parent
entity ceases to control each of the subsidiaries. Disclosure Requirements
Where a parent entity’s loss of control of a subsidiary
occurs during a financial year, the consolidated The consolidated financial statements must disclose,
statement of financial performance shall include the by way of note:
results of the subsidiary for that part of the financial a the identity of the parent entity within the
year during which the parent entity had control of economic entity and, if the economic entity is part
the subsidiary. of one or more larger economic entities, the
identity of the ultimate parent entity in Australia
Dissimilar Accounting Policies and, if different, the identity of the ultimate parent
entity;
Where the accounting policies adopted by entities
b the identity and, where applicable, country of
within the economic entity are dissimilar and are
incorporation of each subsidiary within the
not required by another Accounting Standard,
economic entity, indicating those which have
adjustments to achieve consistency shall be made
become part of the economic entity during the
in preparing the consolidated financial statements.
financial year;
c the identity of any entity which has ceased to be
Sale of an Ownership Interest in a Subsidiary part of the economic entity during the financial
year, the ownership interest, if any, which the
Loss of Control of the Subsidiary parent entity retains in that entity and the
aggregate gain or loss for the economic entity
Where the parent entity loses control of a subsidiary
arising from those cessations;
as a result of the sale of an ownership interest, the
gain or loss recognised on the sale, in the d the identity of any subsidiary in which the parent
entity holds an ownership interest and/or voting
consolidated financial statements is adjusted by the
rights of 50 percent or less, together with an
net post-acquisition movement to the date of sale in
explanation of how control exists;
the retained profits or accumulated losses and
reserves of the subsidiary. e the identity of any entity in which the parent entity
holds an ownership interest of more than 50
percent but which is not a subsidiary of that parent
Retention of Control of the Subsidiary entity, together with an explanation of why control
Where an ownership interest in a subsidiary is sold does not exist; and
and the parent entity retains control of that f the respective gain or loss, if any, made by the
subsidiary, the gain or loss recognised on the sale in parent entity and the outside equity interest on
the consolidated financial statements is adjusted by new issues of shares by subsidiaries.
the net pre-acquisition retained profits or
accumulated losses and reserves of the subsidiary
relating to the portion of the ownership interest sold.
AASB 1025: Application of the
Reporting Entity Concept and
Outside Equity Interest other Amendments
Outside equity interest is equity in the economic
entity other than that attributable to the ownership Purpose
group of the parent entity and is described as such The purpose of this Standard is to make amendments
and disclosed as an equity item in the consolidated to certain Accounting Standards to:
statement of financial position, disclosing separately
the capital, retained profits or accumulated losses a revise their citations;
and reserves. b revise their interpretation provisions;
c revise their application provisions;

54
d require their application to financial statements The amounts of cash at the beginning and end of
where such application is of a material the year must be separately disclosed, with cash as
consequence; at the end of the year reconciled to the related
e introduce or amend definitions; and items in the statement of financial position. The
f introduce or amend transitional provisions to be financial report must disclose the policy adopted
applied when a company becomes a reporting for determining which items are classified as cash
entity. in the statement.

Major Amendments Classification

The title and citation clause of all existing approved Cash flows of the company or economic entity
Accounting Standards have been amended by must be classified as arising from operating,
substituting the acronym “AASB” for the acronym investing or financing activities.
“ASRB”.
“Operating activities” are those activities which
The application of all existing Accounting relate to the provision of goods and services and
Standards has been amended so that the Standards other activities that are neither investing nor
apply only to each company that is a reporting financing activities.
entity, and to each company which is a parent entity
“Financing activities” are those activities which
in an economic entity which is a reporting entity
relate to changing the size and/or composition of
and where the application is of a material
the financial structure of the entity, ie., borrowings
consequence.
and equity.
Reference should be made to Part 1 of this guide in
“Investing activities” are those activities which
relation to the principles of differential reporting.
relate to the acquisition and/or disposal of non-
current assets and other productive assets, and
AASB 1026: Statement of Cash investments not falling within the definition of
cash.
Flows (AAS 28)
Cash Flows to be Highlighted
Preparation of a Statement of Cash Flows
The following cash flows, appropriately classified,
A “Statement of Cash Flows” so titled is to be
are disclosed separately in the statement of cash
prepared and included in the financial report.
flows:
The statement of cash flows discloses separately the
a interest and other items of a similar nature
gross cash inflows and outflows for the financial received;
year. However, cash flows arising from items where
turnover is quick, the amounts are large and the b dividends received;
maturities are short, and the holding and c borrowing costs, including interest and other
disbursing cash on behalf of customers may be costs of finance, paid;
reported on a net basis. In addition, financial d dividends paid; and
institutions may disclose cash flows arising from e extraordinary items.
the following transactions on a net basis:
Also, cash flows relating to income taxes must be
a cash receipts and payments for the acceptance separately disclosed in the statement of cash flows
and repayment of deposits with a fixed maturity and classified as arising from operating activities
date; unless they can be specifically identified with
b the placement of deposits with and withdrawal of investing and financing activities. Where cash
deposits from other financial institutions; and flows relating to income taxes are allocated to more
c cash advances and loans made to customers and than one category the financial statements must
the repayment of these advances and loans. separately disclose the total amount of income
taxes to be paid during the period.

55
Cash Flows from Operating Activities b a summary of used and unused loan facilities
and the extent to which these can be continued
Cash flows from operating activities are presented
or extended; and
using the direct method, where cash inflows and
cash outflows are reported in gross terms, except to c the amount of cash held that is not available for
the extent that certain cash flows (as identified use and the nature of the restrictions placed
upon its use.
above) are permitted to be reported on a net basis.

A note reconciling cash flows from operating

activities to profit from ordinary activities after AASB 1027 Earnings per Share
related income tax must be prepared. A revised AASB 1027 “Earnings per Share” was
issued in June 2001 and applies to annual
Acquisitions and Disposals of Entities reporting periods beginning on or after 1 July 2001.
The Standard applies to each entity required to
The following shall be separately disclosed, but may prepare general purpose financial reports under
be presented in aggregate for all entities acquired: Part 2M.3 of the Corporations Act 2001 that has
a purchase price of the entities acquired; listed ordinary shares, is in the process of listing,
or discloses EPS in its financial report.
b the portion of the purchase prices discharged in
cash; The method adopted to calculate basic and diluted
c the amounts of cash held by the entities acquired Earnings Per Share (EPS) is significantly different
as at acquisition date; and to that prescribed by the superseded AASB 1027
d the amounts of the other assets and liabilities of “Earnings per share” (issued in November 1992).
the entities acquired as at acquisition date, The main features of the revised Standard are as
summarised by nature or function. follows:

The following shall be separately disclosed, but may

be presented in aggregate for all entities disposed: Calculation of Basic EPS

a the consideration received; Basic EPS must be calculated by dividing the

earnings of the entity for the reporting period by
b the portion of the consideration received in cash;
the weighted average number of ordinary shares of
c the amounts of cash held by the entities disposed the entity, adjusted for the bonus element, if any.
of as at the disposal date; and
For the purpose of calculating basic EPS, earnings
d the amounts of other assets and liabilities of the
must be calculated as net profit or loss (inclusive of
entities disposed of as at the disposal date,
summarised by nature or function. any extraordinary items) adjusted to exclude:
a any portion attributable to outside equity
Information about Non–Cash Financing and interest;
Investing Activities b any costs of servicing equity, paid or provided
Non-operating transactions and other events for, other than dividends on ordinary shares and
involving external parties which do not result in cash partly-paid ordinary shares; and
flows during the year but affect assets and liabilities c any cumulative preference share dividends not
must be disclosed in the financial report. already excluded,
in respect of the reporting period.
Other Disclosures
The Requirement to Disclose Diluted EPS
The financial report must disclose separately the
(“The Trigger Test“)
following information as at the end of the financial
year: Diluted EPS must be disclosed where an entity has
on issue potential ordinary shares which are
a details of credit standby arrangements, including
dilutive, regardless of materiality.
the nature of each arrangement and the total
amount of credit unused;

56
Potential ordinary shares are dilutive when and Disclosure Requirements
only when the conversion to, calling of, or
In addition to the disclosure of Basic EPS and
subscription for, ordinary shares would decrease
Diluted EPS on the face of the statement of
(increase) net profit (loss) from continuing
financial performance, the financial report must
ordinary operations per share, except that:
disclose:
a potential ordinary shares for which conversion
a the amount used as the numerator in calculating
to, calling of, or subscription for, ordinary share
diluted EPS, and a reconciliation of this amount
capital is mandatory must be considered dilutive;
to net profit or loss for the reporting period;
and
b the weighted average number of ordinary shares
b potential ordinary shares for which conversion
and potential ordinary shares of the entity used
to, calling of, or subscription for ordinary share
as the denominator in calculating diluted EPS
capital is at the option of the entity must be
with a reconciliation to the basic EPS
considered dilutive where, based on conditions
denominator;
at the reporting date, it is probable that the entity
will successfully exercise its option at any time c the weighted average number of converted,
in the future. lapsed or cancelled potential ordinary shares
included in the calculation of diluted EPS;
The net profit or loss from continuing ordinary
operations, for the purpose of determining whether d the number and nature of any potential ordinary
potential ordinary shares are dilutive, must be shares that are not dilutive and are therefore not
determined as the earnings used in the calculation used in the calculation of diluted EPS;
of Basic EPS, excluding amounts relating to: e any conversion to, calling of, or subscription for,
ordinary shares that occurs between the
a discontinuing operations; reporting date and the time of completion of the
b extraordinary items; financial report; and
c adjustments for changes in accounting policies f any issue of potential ordinary shares that occurs
that affect the current reporting period but relate between the reporting date and the time of
to prior reporting periods; and completion of the financial report.
d corrections of fundamental errors.
AASB 1028: Employee Benefits
Calculation of Diluted EPS
A revised AASB 1028 “Employee Benefits” was
Diluted EPS must be calculated by dividing the issued in June 2001 and applies to annual
earnings of the entity for the reporting period by reporting periods beginning on or after 1 July
the weighted average number of ordinary shares 2002.
and dilutive potential ordinary shares, adjusted for
the bonus element, if any. General Recognition Criteria
For the purpose of calculating diluted EPS, Liabilities and expenses arising in respect of
earnings must be determined as the earnings used employee benefits must be recognised when and
in the calculation of Basic EPS, adjusted by the only when they are capable of being measured
after income tax effect of: reliably; and in respect of:
a dividends, interest or other financing costs a expenses, it is probable that the consumption or
associated with dilutive potential ordinary shares loss of future economic benefits has occurred;
that have been recognised as expenses during and
the reporting period or otherwise deducted in
b liabilities, it is probable that settlement will be
arriving at earnings for Basic EPS; and
required.
b any other non-discretionary changes in revenues
or expenses for the reporting period that would
result from the conversion of the dilutive
potential ordinary shares.

57
Specific Recognition Criteria of Employee Profit Sharing and Bonus Plans
Benefits The liability for employee benefits in the form of
There are specific recognition criteria for wages profit sharing and bonus plans must be recognised
and salaries (including non-monetary benefits), when and only when, the entity has no realistic
compensated absences, profit sharing and bonus alternative but to settle the liability, and the liability
plans, termination benefits and post-employment can be reliably measured.
benefits (other than superannuation and medical
A liability is capable of being reliably measured
benefits). The specific requirements are as follows:
when at least one of the following conditions is
met:
Wages and Salaries (including
non–monetary benefits) a there are formal terms in the plan for
determining the amount of the benefit;
When an employee has rendered service to the
b the entity determines the amounts to be paid
entity during a reporting period, the entity must
before the time of completion of the financial
recognise the amount of wages and salaries
report; or
expected to be settled in exchange for that service:
c past practice gives clear evidence of the amount
a as a liability, after deducting any amount already of the entity’s obligation.
paid; and
b as an expense, unless recognised as part of the Termination Benefits
carrying amount of an asset in accordance with
another Accounting Standard. A liability and expense for termination benefits
must be recognised when and only when the entity
is presently obliged to provide benefits that relate
Compensated Absences
to either:
A liability for employee benefits in the form of
a terminating the employment of an employee or
compensated absences must be recognised when
group of employees before the normal
and only when:
retirement date; or
a in the case of accumulating compensated b providing termination benefits in accordance
absences, employees render service that entitles with a voluntary redundancy scheme.
them to future compensated absences; or
An entity is presently obliged to provide
b in the case of non-accumulating compensated termination benefits when, and only when, the
absences, the absences occur.
entity has:
Compensated absences include compensation paid
a developed a detailed formal plan for the
or payable in respect of absence for reasons such as
terminations identifying at least:
annual leave, sickness, short-term disability,
maternity or paternity, sabbatical and long service. i the location, function and approximate
Accumulating compensated absences are those that number of employees who will be
are carried forward and can be used in future compensated for terminating their services;
periods. Non-accumulating compensated absences ii the termination benefits for each job
are not carried forward and lapse to the extent that classification or function; and
the entitlement is not used in the period and do iii when termination will occur; and
not entitle employees to cash payment for unused b raised a valid expectation in those employees
entitlement on leaving the entity. affected that it will carry out the terminations.

58
There are also specific requirements relating to Disclosure
termination benefits recognised as a part of an
The disclosure requirements contained in the
acquisition of an entity or operation.
revised AASB 1028 are more extensive than those
contained in the superseded standard. In particular,
Post–employment benefits (Other than the revised standard requires the disclosure of:
Superannuation and Medical Benefits)
a the nature and terms of employee benefit
A liability for post-employment benefits (other than arrangements under which employees are
superannuation and medical benefits) must be offered an opportunity to acquire equity-based
recognised: instruments in the employer;

a progressively over the reporting periods up to b the aggregate liability and the aggregate asset
the time when the benefits become vested, arising from employee benefits and related on-
where the benefits vest after a specified costs that have been recognised in the financial
qualifying period; and statements;

b in the reporting period, an employee is c the accounting policy for equity-based

appointed to a specified position, where the compensation arrangements and the amount
benefits vest at the time of appointment, recognised in the financial statements as a result
of applying the accounting policy;
and continue to be recognised until they are
settled. d details of equity-based instruments at the
beginning of the reporting period that are held
by equity-based compensation plans or by
Recognition on a Net Basis employees;
Revenue and expenses relating to wages and e details of equity-based instruments granted or
salaries, compensated absences and profit sharing distributed during the reporting period that are
and bonus plans must be recognised on an overall held by equity-based compensation plans or by
net basis. Revenue and expense relating to other employees;
employee benefits must be individually recognised f details of equity-based instruments granted by
on a net basis. the entity that are exercised by equity-based
compensation plans or by employees during the
Measurement of Employee Benefits reporting period;
g the nature and number of equity-based
Entities are required to measure employee benefit
instruments granted by the entity that lapsed
liabilities on a nominal basis for wages and during the reporting period that were held by
salaries, annual leave, sick leave and other equity-based compensation plans or by
employee benefits that are expected to be settled employees;
within 12 months of the reporting date. Entities are
h details of equity-based instruments at the end of
required to use remuneration rates that it expects
the reporting period that are held by the equity-
to pay when the obligation is settled as distinct
based compensation plans or the employees; and
from remuneration rates at reporting date.
i details relating to defined benefit
Employee benefit liabilities expected to be settled superannuation plans sponsored by the
more than 12 months after reporting date must be employer.
measured as the present value of the estimated The Standard does not require the disclosure of the
future cash outflows to be made by the employer in fair value of share options or any other similar
respect of services provided by employees up to the rights granted.
reporting date. The discount rate is the market
yields as at reporting date on national government
bonds.

59
AASB 1029: Interim Financial Condensed Statement of Financial
Performance
Reporting
Where an entity includes a condensed statement of
The revised AASB 1029 “Interim Financial
financial performance in its interim financial
Reporting” was issued in October 2000 and applies
report, the condensed statement of financial
to interim reporting periods beginning on or after 1
performance must include, as a minimum:
July 2001. The main features of the revised
Standard are as follows: a profit or loss/result from ordinary activities
before income tax expense (income tax revenue);
Content b profit or loss/result from ordinary activities after
related income tax expense (income tax revenue);
The interim financial report must include, as a
minimum: c profit or loss from extraordinary items after
related income tax expense (income tax revenue);
a a condensed statement of financial performance;
d net profit or loss/result;
b a condensed statement of financial position;
e net profit or loss/result attributable to members
c a condensed statement of cash flows; and of the parent entity;
d other disclosures required by the Standard. f total revenues, expenses and valuation
The commentary to the Standard indicates that adjustments attributable to members of the
condensed financial statements are those that do parent entity and recognised directly in equity;
not include all the line items presented in the most g total changes in equity other than those resulting
recent annual financial report of the entity. from transactions with owners as owners; and
h basic and diluted earnings per share.

60
Condensed Statement of Financial Position
Where an entity includes a condensed statement of financial position in its interim financial report, the
condensed statement of financial position must include, as a minimum, each of the headings and subtotals
that were presented in the most recent annual financial report of the entity.

Condensed Statement of Cash Flows

Where an entity includes a condensed statement of cash flows in its interim financial report, the condensed
statement of cash flows must include, as a minimum, each of the headings and subtotals that were presented
in the most recent annual financial report of the entity.

Inclusion of Additional Line Items

Additional line items must be included in the Statement of Financial Performance, Statement of Financial
Position, or Statement of Cash Flows if their significance in the overall context of the entity has changed since
the most recent annual financial report and their omission would make the interim financial statement
misleading.

Full Financial Statements

An entity may include more than the minimum line items, headings and subtotals in condensed financial
statements or other specific information required by AASB 1029 in the interim financial report. If an entity
chooses to include in its interim financial report a full set of financial statements and notes of the type
normally included in an annual financial report, the form and content of those financial statements and notes
must conform to the requirements of AASB 1029 as well as those required by other AASB Standards (or AAS
Standards, where applicable).

Current and Comparative Information

The following table outlines the reporting periods for which information must be presented in the interim
financial reports:

Current Comparative

Current Cumulative Current Current Cumulative Prior

Interim Annual Interim Interim Annual Year
Period Period-to- Period Period Period-to End
date End date

Statement of Financial Position ✓ ✓

Statement of Financial Performance ✓ ✓* ✓ ✓*

Statement of Cash Flows ✓ ✓* ✓ ✓ *

* Information needed only be presented for the cumulative annual period-to-date (current and comparative) where interim financial
reports are prepared more frequently than half-yearly, for example, quarterly.

61
Accounting Policies f where different estimation methods are used in
the interim financial report as compared with
In the preparation of the interim financial report,
the most recent annual financial report, a
the entity must apply:
description of the nature of those methods;
a the same accounting policies as were applied in g where the interim operations are seasonal or
its most recent annual financial report; or irregular, explanatory comments about the
b the accounting policies to be applied for the next seasonality or irregularity of those operations;
annual financial report, where accounting policy h a description of material events subsequent to
changes have been made since the most recent the end of the interim period that have not been
annual reporting date or where the interim recognised in the interim financial statements
financial report is prepared during the first and an indication, where possible, of the
annual reporting period of the entity. financial effect of each event;
i disclosure of the nature and amount of items
Annually Determined Items affecting assets, liabilities, equity, net profit or
The commentary to the Standard indicates that, for loss/result, or cash flows which are material to
certain items, it is necessary to accrue revenues an understanding of the interim period;
and expenses using an estimated annual effective j disclosure of the nature and amount of revisions
rate. For example, income tax expense is in estimates of amounts reported in prior
recognised in each interim period using the interim periods of the current annual reporting
estimated annual effective income tax rate expected period or revisions in estimates of amounts
for the full annual reporting period. reported in prior annual reporting periods, if
those revisions have a material effect in the
current interim period;
Disclosure Requirements
k disclosure of issuances, repurchases, and
The interim financial report must include: repayments of debt securities and equity
securities in accordance with Accounting
a the interim reporting date of, or the interim
Standard AASB 1026 and Australian Accounting
reporting period covered by, each interim
Standard AAS 28 “Statement of Cash Flows”;
financial statement, whichever is appropriate;
l for each class of shares included in equity,
b a statement that the interim financial report is a
disclosure of the amount in aggregate or per
general purpose financial report;
share of dividends that were either recognised as
c a statement as to whether the financial report a liability in the interim period or paid during
has been prepared in accordance with the interim period without previously being
accounting standards and UIG Consensus Views recognised as a liability;
(where there has been a change from the
m segment revenues and segment result for
previous annual report);
business segments or geographical segments,
d a description of the measurement basis or bases whichever is the entity’s primary format of
used in preparing the interim financial report segment reporting, if Accounting Standard
(where there has been a change from the most AASB 1005 “Segment Reporting” requires the
recent annual report); entity to disclose segment information in its
e a statement that the same accounting policies annual financial report;
are followed in the interim financial report as n details of changes in the composition of the
those applied in the most recent annual financial entity during the annual reporting
report or, if those policies have been changed, a period–to–date, including acquisition or disposal
description of the nature and effect of the of subsidiaries and restructurings;
change;

62
o a description of any significant activities or b any changes in net market value are recognised
events relating to a discontinuing operation for as revenues or expenses in the financial year in
which the initial disclosure event has occurred, which the changes occur.
including any significant changes since the last
annual reporting date in the amount or timing
of cash flows relating to the assets to be disposed
AASB 1031: Materiality (AAS 5)
of and liabilities to be settled; and
p a description of changes in contingent liabilities Application of Materiality
or contingent assets since the last annual The Standards specified in other Accounting
reporting date or a statement that there have Standards apply to the financial report where
been no changes since the last annual reporting information resulting from their application is
date. material. Information is material if its omission,
misstatement or non-disclosure has the potential to
AASB 1030: Application of adversely affect:

Accounting Standards to a decisions about the allocation of scarce resources

made by users of the financial report; or
Financial Year Accounts and
b the discharge of accountability by the
Consolidated Accounts of management or governing body of the entity.
Disclosing Entities other than
Companies Guidance in Deciding Whether an Item is
Material
Disclosing Entities to Comply with AASB The Standard provides guidance (by way of
Accounting Standards commentary) to assist in deciding whether or not
an item is material. In deciding whether or not an
Except as noted below, all Accounting Standards
item is material, the following should be
shall be applied in preparing and presenting the
considered:
financial statements for a financial year:
a the nature and amount of the item are usually
a as if any reference in those Standards to a
evaluated together;
company as the entity preparing the financial
statements includes a reference to a disclosing b comparing the item to the appropriate base
entity which is not a company; and amount, for example:

b despite the applicability of Standards currently in i in respect items in the statement of financial
force, but subject to their operative date. position - shareholders’ equity and the
appropriate asset and liability class total;
Exceptions ii in respect of items in the statement of
financial performance – net profit or loss, and
Disclosing entities other than companies and other average net profit or loss; or
bodies corporate listed on the Australian Stock
iii in respect of items in the statement of cash
Exchange are not required to apply accounting flows – net cash flows provided by operating,
standard AASB 1027 “Earnings Per Share”. investing or financing activities and average
In accounting for financial assets, undertakings to net cash flows provided by operating,
which prescribed interests relate are not required investing or financing activities;
to apply the method set out in accounting standard c considering the financial report as a whole; and
AASB 1041 “Revaluation of Non-Current Assets” d comparing items to any directly related items
for the recognition of revaluation increments and (eg. compare interest expense to outstanding
decrements in net profit or loss for the reporting loans).
period or as reserves provided that:
a the financial assets are measured at net market
value as at the reporting date; and

63
An amount which is equal to or greater than 10% Statement of Financial Position
of the appropriate base amount (as detailed above)
Assets and liabilities must be disclosed and
may be presumed to be material unless there is
classified in the statement of financial position
evidence or a convincing argument to the contrary.
according to their nature and in an order reflecting
An amount which is equal to or less than 5% of the
their relative liquidity.
appropriate base amount (as detailed above) may
be presumed not to be material unless there is In addition, the following specific assets and
evidence or a convincing argument to the contrary. liabilities must be disclosed in the statement of
financial position or the notes thereto, classified by
their nature and measurement basis:
AASB 1032: Specific Disclosures
a cash and liquid assets;
by Financial Institutions (AAS 32)
b receivables due from other financial institutions;
The purpose of the Standard is to require the
c bills held by overseas operations of the entity
disclosure of information concerning the liquidity, that are eligible for rediscounting with a central
solvency and the relative degree of risk attaching to bank;
different activities of financial institutions.
d securities held (distinguishing between trading
securities and others);
Statement of Financial Performance
e loans;
Revenues and expenses must be disclosed in the f deposits with regulatory authorities and industry
statement of financial performance or notes support schemes;
thereto, classified by their nature. In addition, the
g acceptances;
following specific revenue and expense items must
be disclosed, classified by their nature and h payables due to other financial institutions;
measurement basis: i deposits (distinguishing between certificates of
deposit and others); and
a interest revenue and expense;
j borrowings.
b dividend revenue;
c revenues and expenses arising from securities Maturity Analysis
and trading securities;
A maturity analysis of the following assets and
d recoveries of bad and doubtful debts;
liabilities must be disclosed:
e other revenues and expenses arising from
financial instruments; a receivables due from other financial institutions;
f fee and commission revenue and expense; b securities held (excluding trading securities);
g general administration expenses; and c loans, net of unearned revenue and specific
provisions for impairment;
h other revenues and expenses.
d payables due to other financial institutions; and
The Standard permits the following revenue and
expense items to be recognised and disclosed on a e deposits and borrowings.
net basis for each class of financial instrument The maturity analysis should include at least the
(according to their nature and measurement basis): following categories or time bands:
a revenues and expenses arising from the disposal a at call;
of financial instruments; and b overdrafts;
b revenues and expenses arising from changes in c less than 3 months;
the net fair value of financial instruments.
d 3 months to 12 months;
In addition, an analysis of interest revenue and
e 1 year to 5 years;
interest expense must be disclosed in the financial
statements, incorporating information about f more than 5 years; and
average balances and average interest rates. g no maturity specified.
This analysis is not required to be disclosed in the financial statements of a parent The maturity analysis is not required to be disclosed in the financial statements of a
entity where those financial statements are presented with the consolidated financial parent entity where those financial statements are presented with the consolidated
statements of the economic entity. financial statements of the economic entity.

64
Other Disclosure Requirements c a contractual right to exchange financial
instruments with another entity under
The financial report must disclose the following
conditions that are potentially favourable; or
information:
d an equity instrument of another entity.
a particulars of concentrations of deposits and
“Financial Liability” means any liability that is a
borrowings, including a description of the
contractual obligation:
similar characteristics that identify each
concentration; a to deliver cash or another financial asset to
b commitments to extend credit; another entity; or
c capital and other expenditure commitments b to exchange financial instruments with another
contracted for; entity under conditions that are potentially
unfavourable.
d contingent liabilities;
“Equity Instrument” means any contract that
e impaired loans, acquired assets and past-due
evidences a residual interest in the assets of an
loans; and
entity after deducting all of its liabilities.
f the nature and extent of fiduciary activities.
The above information is not required to be disclosed in the financial statements of a
parent entity where those financial statements are presented with the consolidated Presentation of Liabilities and Equity
financial statements of the economic entity.
Financial instruments, or their component parts,
must be classified by the issuer on initial
AASB 1033: Presentation and recognition as liabilities or as equity in accordance
with the substance of the contractual arrangement
Disclosure of Financial and the definitions of a financial liability and equity
Instruments (AAS 33) instrument. Once recognised, the classification
This Standard does not apply to: continues at each subsequent reporting date until a
transaction or other specific action by the issuer or
a interests in subsidiaries, joint venture entities, or the holder alters the substance of the financial
associated entities; instrument, or the financial instrument is removed
b operating leases; from the issuer’s statement of financial position.
c employers’ obligations for post-employment
benefits of all types; Classification of Converting Financial
d employers’ obligations under employee share Instruments
option and share purchase plans; or
A converting financial instrument must be
e obligations arising under insurance contracts. classified as a financial liability by the issuer on
The disclosure requirements of this Standard do initial recognition to the extent that the holder of
not apply to the financial report of a parent entity the instrument is not exposed to changes in the
where that financial report is presented with the fair value of the issuer’s equity instruments.
consolidated financial statements of the economic
The issuer must classify the converting financial
entity.
instrument as equity on initial recognition to the
extent that the holder is exposed to changes in the
Key Definitions fair value of the issuer’s equity instruments.
“Financial Instrument” means any contract that
gives rise to both a financial asset of one entity and
a financial liability or equity instrument of another
entity.

“Financial Asset” means any asset that is:

a cash;
b a contractual right to receive cash or another
financial asset from another entity;

65
Classification of Compound Financial Although not strictly financial instruments, the above
Instruments disclosure requirements also apply to gold contracts
and to other commodity contracts of a type normally
The Standard requires the issuer of financial
settled other than by physical delivery in accordance
instruments that contains both financial liability
with general market practice, despite the contract
and equity elements to classify the instrument’s
terms requiring physical delivery.
component parts separately. The classification of
the component parts must not be revised where The Standard also encourages additional disclosure
there has been a change in the likelihood that the of information when it is likely to enhance the
conversion option will be exercised, even when the financial statement users’ understanding of the
exercise of the option may appear to have become entity’s use of financial instruments.
economically advantageous to the holder.

The requirement to classify the instrument’s AASB 1034 “Financial Report

component parts separately only applies to
compound financial instruments that are issued on Presentation and Disclosure“ (AAS
or after 1 January 1998. 37)
This Standard applies to each entity that is required
Interest, Dividends, Losses and Gains to prepare a financial report under Chapter 2M of the
Interest, dividends, gains and losses must be Corporations Act 2001.
classified as expenses, revenues or changes in
equity on a basis consistent with the balance sheet Presentation Requirements
classification of the related financial instrument or
The financial report must be presented in the English
component parts in the statement of financial
language and in the Australian currency, and be
position.
clearly identified and distinguished from other
information in the same published document.
Set–Off Requirements
If the financial report presents information for
Financial assets and financial liabilities must be current or prior financial years that are not equal to
set-off when, and only when, there is a legally twelve months, the financial report must disclose, in
recognised right of set-off and the entity intends to addition to the period covered by the financial report:
settle the asset and the liability on an net basis or
to realise the asset and settle the liability a the reason for a period other than twelve months
simultaneously. being used; and
b the fact that comparative amounts disclosed in the
financial report and related notes are not
Disclosure Requirements
comparable where the lengths of the financial
The financial report must disclose the following years differ.
information: Each component of the financial report must be
a terms and conditions of financial instruments; clearly identified. In addition, the following
information must be prominently displayed and
b accounting policies and methods adopted;
repeated when it is necessary for a proper
c objectives for holding or issuing derivative understanding of the information presented:
financial instruments, the context of those
objectives and the strategies for achieving them; a the name of the entity or other means of
identification, and any change in name from the
d exposure to interest rate risk;
preceding reporting date
e exposure to credit risk;
b whether the financial report covers an individual
f net fair value of financial assets and financial entity or an economic entity or both;
liabilities;
c the reporting date or the period covered by each
g financial assets recognised at amounts in excess financial statement, as is appropriate;
of net fair value; and
h hedges of anticipated future transactions.

66
d the rounding used in the presentation of d the amount of franking credits available for
amounts in the financial report; and subsequent reporting periods to the
e when currencies other than the Australian shareholders of the entity if it is not an
currency are used in a note in the financial economic entity or the parent entity in an
report, the currencies in which amounts are economic entity, by disclosing the balance of the
stated. franking account as at the reporting date,
adjusted for:
Disclosure Requirements i franking credits that will arise from the
payment of the amount of the provision for
The financial report must disclose the following if income tax;
not provided elsewhere in information published
ii franking debits that will arise from the
in the document that contains the financial report:
payment of dividends recognised as a liability
a the domicile and legal form of the entity, its at the reporting date;
country of incorporation and the address of the iii franking credits that will arise from the
registered office (and principal place of business, receipt of dividends recognised as receivables
if different from the registered office); at the reporting date; and
b a description of the nature of the entity’s iv franking credits that the entity may be
operations and its principal activities; prevented from distributing in subsequent
c the name of the parent entity of the entity and reporting periods; and
the ultimate parent entity, if any; and e executives’ remuneration.
d either the number of employees at the reporting
date or the average number of employees during AASB 1036: Borrowing Costs
the reporting period.
(AAS 34)
The financial report must also disclose:
a auditors’ remuneration; Recognition of Borrowing Costs
b where the entity is dependent on another entity
Borrowing costs must be recognised as an expense
for a significant volume of revenue or financial
in the financial year in which they are incurred,
support and that dependency is not clearly
except to the extent that they are capitalised (as
discernible from a separate line item in the
explained below).
statement of financial performance or statement
of financial position: “Borrowing costs” means interest and other costs
i the name of the entity on which there is an incurred by an entity in connection with the
economic dependency; and borrowing of funds and includes amortisation of
ii the nature of that economic dependency; discounts or premiums relating to borrowings,
finance charges with respect to leases, and
c for each class of shares included in equity, where
exchange difference arising from foreign currency
either dividends payable were first recognised as
a liability during the reporting period or
borrowings, net of the effect of any hedges.
dividends were paid during the reporting period
without previously being recognised as a liability: Borrowing Costs to be Capitalised
i the amount, in aggregate and per share, of Borrowing costs must be capitalised where:
those dividends that have been or will be
franked and the tax rate at which those a they are directly attributable to the acquisition,
dividends have been or will be franked; and construction or production of a qualifying asset;
and
ii the amount, in aggregate and per share, of
those dividends that have not been or will not b would have been avoided if the expenditure on
be franked; the qualifying asset had not been made.

67
However, borrowing costs capitalised during the Commencement of Capitalisation
financial year must not exceed the amount of
The capitalisation of borrowing costs must
borrowing costs incurred by the entity during the
commence when:
financial year.
a costs for the asset are being incurred;
“Qualifying assets” are those assets that necessarily
take a substantial period of time (greater than 12 b borrowing costs are being incurred; and
months) to get ready for intended use or sale. They c activities that are necessary to prepare the asset
will include certain costs carried forward under for its intended use or sale are in progress,
AASB 1022 “Accounting for the Extractive including technical and administrative work but
Industry” where the costs are expected to be excluding the holding of an asset when no
recouped through successful development and production or development are taking place.
exploitation of the area of interest, or alternatively,
by its sale. Suspension of Capitalisation
Borrowing costs incurred while active development
Funds Borrowed Generally is interrupted for an extended period must be
recognised as an expense, for example, during a
Where funds are borrowed generally, for example
labour dispute, but not where the delay is a
through a central treasury function, the amount of
necessary part of the production process.
borrowing costs to be capitalised to qualifying
assets must be determined by multiplying:
Cessation of Capitalisation
a a capitalisation rate equal to the weighted
average rate applicable to general outstanding Capitalisation of borrowing costs must cease when
borrowings during the financial year; by substantially all the activities necessary to prepare
the qualifying asset for its intended use or sale are
b the weighted average accumulated expenditures
complete. The qualifying asset would normally be
relating to qualifying assets during the financial
considered “ready for its intended use” when the
year, where they gave rise to borrowings that
physical construction is complete even though, for
would have been avoided had the expenditure
not taken place. example, routine administrative work may still
continue.
When calculating borrowing costs to be capitalised,
expenditure relating to qualifying assets must be The commentary to the Standard prescribes that,
reduced by any recovery of expenditure or grants when the qualifying asset is completed in parts and
received. each part is capable of being used while
construction continues, capitalisation of borrowing
Funds Borrowed Specifically for a costs for completed parts must cease when
Qualifying Asset substantially all activities necessary to prepare the
part for its intended use or sale are complete.
Where funds are borrowed specifically for
acquiring, constructing or producing a qualifying
Recoverable Amount
asset, the actual borrowing costs incurred on that
borrowing during the financial year must be The recoverable amount test is required to be
capitalised to that asset. However the total applied to qualifying assets, consistent with
borrowing costs to be capitalised are reduced by: accounting standard AASB 1010 “Recoverable
Amount of Non-Current Assets”.
a costs associated with excess borrowings; and
b investment revenue earned on such funds. The recoverable amount test does not apply:
a to qualifying assets of non-for-profit entities
where the service potential of those assets is not
primarily dependent on their ability to generate
net cash inflows; or

68
b where, pursuant to legislation, ministerial Any changes in the carrying amount of a SGARA
directive or other government authority, a must be recognised in net profit or loss in the
qualifying asset is a non-current asset that financial year in which the change occurs.
provides goods or services at no charge, or at less
than full cost recovery. The non-living produce of a SGARA must be
accounted for in accordance with AASB 1019
“Inventories”. The NMV of the non-living produce
Disclosure Requirements
of a SGARA, immediately after it becomes non-
The financial report must disclose: living is deemed to be the cost of non-living
a the amount of borrowing costs recognised as an produce for AASB 1019 purposes. Any differences
expense during the financial year; between the NMV of non-living produce extracted
from SGARAs and the cost of extraction must be
b the amount of borrowing costs recognised
shown as revenue or expense when extracted.
during the financial year as part of the carrying
amount of qualifying assets;
c the capitalisation rate used to determine the
Disclosure Requirements
amount of borrowing costs capitalised with SGARAs must be presented separately in the
respect to funds borrowed generally; and statement of financial position and the notes to the
d the amount of any investment revenue earned financial statements must disclose:
on borrowed funds that has been deducted from
a the nature of SGARAs and an estimate or
the borrowing costs incurred on funds borrowed
relevant indication of their physical quantity,
specifically for a qualifying asset.
separately classified between “plants” and
“animals”, and sub-classified as appropriate to
AASB1037: Self–Generating and the circumstances of the entity, showing
separately those SGARAs over which the entity
Regenerating Assets (AAS 35) has rights that are obtained through leases or
similar types of arrangements;
Scope b SGARAs for which the entity’s use or capacity to
A self-generating and regenerating asset (SGARA) sell is subject to restrictions imposed by
is a non-human living asset and includes forests, regulations or other external requirements that
livestock, crops, fruit bearers and the living assets have a significant impact on their total net
of aquaculturalists and stud breeders and the market value. The total and restricted amounts
Standard also applies where rights over SGARAs of those SGARAs must be disclosed, together
with details of the nature and extent of those
have been obtained through leases. However the
restrictions;
Standard does not apply to SGARAs that are held
for the primary purpose of aesthetic, heritage, c if the net market values of SGARAs are based on
ecology, the environment or recreation. amounts other than market prices observed in
active and liquid markets:

Accounting for SGARAs i the method of determining the net market

values;
A SGARA must be recognised when it is probable ii any significant assumptions made in
that the future economic benefits embodied in the determining the net market values; and
SGARA will eventuate and its value can be
iii whether the net market values have been
measured reliably, at net market value (NMV).
determined in accordance with an
Where there is no active and liquid market,
independent valuation or a directors’
SGARAs must be measured using the best valuation and, where the net market values
indicator of NMV based on all relevant have been determined in accordance with an
information. independent valuation, the name(s) of the
firm(s) which made that valuation;

69
d the net amount of revenues and expenses arising Premiums and Claims
from increments or decrements in NMV,
Premiums and claims are required to be separated
showing separately the amount that is
on a product basis into their revenue, expense and
attributable to “plants” class, “animals” class, and
each sub-class as appropriate to the change in liability components unless separation is
circumstances of the entity. The method by not practical or the components cannot be reliably
which the net increment or decrement is measured.
determined must be disclosed; and
e the net amount of revenues and expenses arising Liabilities
on extraction, showing separately the amount Liabilities of a life insurer must be measured at net
that is attributable to “plants” class, “animals”
present value, with changes recognised as revenue
class, and each sub-class as appropriate to the
or expense. The Standard provides specific
circumstances of the entity.
guidance with respect to the measurement of
policy liabilities with respect to participating
AASB 1038: Life Insurance benefits, planned margins, changes in assumptions
and discount rates.
Business (AAS 36)

Entity and Consolidation Issues Assets

A life insurer must recognise in its financial report Assets of a life insurer must be measured at NMV,
the assets, liabilities, revenues, expenses and equity with changes recognised as revenue or expense.
of the entity, whether they are designated as However a life insurer must not recognise the
relating to policyholders or to shareholders. excess of its own embedded value over its
recognised net assets as an asset.
The consolidated financial report of an economic
entity that includes a life insurer subsidiary must
Other Accounting Requirements
recognise all of the assets, liabilities, revenues and
expenses of that subsidiary, whether they are The Standard also specifies the accounting
designated as relating to the policyholders or to the methods for reinsurance, investment revenues,
shareholders of that life insurer. participating benefits, imputed inflows and
outflows, and income tax. The transitional
Where a consolidated financial report is prepared provisions of the Standard permit adjustments to
by a life insurer, the life insurers subsidiaries retained profits or accumulated losses at the
should be valued at net market value (NMV). On beginning of the reporting period.
consolidation the assets and liabilities should be
consolidated as per the subsidiaries records with:
Disclosure Requirements
a any excess of the NMV of interests in a
subsidiary over the net assets of the subsidiary The Standard specifies numerous detailed
recognised as a separate asset; or disclosure requirements. The main requirements
are:
b any deficiency of the NMV of interests in a
subsidiary over the net assets of the subsidiary a the following revenues and related explanations
recognised as a revenue or an expense only after: must be disclosed:
i the carrying values of all assets and liabilities i premium revenue;
of the subsidiary have been reviewed, and ii the accounting policy adopted in recognising
remeasured where appropriate; and premium revenue;
ii any asset arising in respect of other iii inwards reinsurance revenues;
subsidiaries as a result of an excess NMV has
iv investment revenue, showing separately
been eliminated.
revenue from:
– equity securities;
– debt securities;
– properties; and
– other;

70
 v revenue arising from the recognition of a d the following assets must be disclosed in the
deficiency of the NMVs of interests in broad order of their liquidity:
subsidiaries over the net amount of i investments, showing separately:
subsidiaries’ assets and liabilities; and
– equity securities;
vi other revenue;
– debt securities;
b the following expenses and related explanations
– properties; and
must be disclosed:
– other, by major class where applicable;
i outwards reinsurance expense;
ii operating assets;
ii operating expenses, showing separately:
iii reinsurance recoveries receivable; and
– claims expense;
iv any excess net market value asset recognised
– policy acquisition expenses, separated into
of interests in subsidiaries, together with the
material components including
components disaggregated by subsidiary, and
commission;
explanations of:
– policy maintenance expenses;
– the factors giving rise to that asset; and
– investment management expenses; and
– any changes in that asset from the previous
– other; financial year;
iii the accounting policy adopted in recognising e policy liabilities, unvested policyholder benefits
claims expense; liabilities and other liabilities, classified by
iv the basis for the apportionment of operating nature, must be disclosed in the broad order of
expenses between policy acquisition, policy their liquidity. The following components of
maintenance and investment management policy liabilities must also be disclosed:
expenses; and i future policy benefits, including participating
v any expense arising from the recognition of a benefits;
deficiency of the NMVs of interests in ii balance of future expenses;
subsidiaries over the net amount of
iii planned margins of revenues over expenses;
subsidiaries’ assets and liabilities;
iv future charges for acquisition costs;
c the following components of profit from
ordinary activities after related income tax v balance of future revenues; and
expense must be shown, separated between vi other items, separated into material
policyholder and shareholder interests: components;
i profit related to movements in policy f the following components of equity must be
liabilities, separated between: disclosed:
– planned margins of revenues over i retained profits wholly attributable to
expenses; shareholders; and
– the difference between actual and assumed ii retained profits where the allocation between
experience; participating policyholders and shareholders
– the effects of changes to underlying cannot be determined; and
assumptions; g other disclosures in relation to income tax
– loss recognition on groups of related regime, solvency information, managed funds,
products or reversal of previously actuarial information and disaggregated
recognised losses; and information for each life fund and for the
shareholder fund on certain statement of
– other movements, separated into material
financial position and profit or loss.
components;
ii investment earnings on assets in excess of
policy liabilities; and
iii other items, separated into material
components;

71
AASB 1039: Concise Financial d the amount of dividends, in aggregate and per share,
identifying:
Reports
i dividends paid and date of payment; and
A revised AASB 1029 “Concise Financial Reports”
ii dividends proposed and not yet paid, and expected
was issued in June 2002 and applies to annual date of payment;
reporting periods ending on or after 30 June 2002.
e where dividends have been paid or are proposed, the
The Standard must be complied with by all entities
amount, in aggregate and per share, of those
that prepare a concise financial report under Part
dividends that:
2M.3 of the Corporations Act 2001.
i have been or will be franked and the tax rate at
The financial statements and specific disclosures which those dividends are franked; and
required in a concise financial report must be ii have not been or will not be franked;
derived from the full financial report of the entity.
f basic and diluted earnings per share, where a listed
Any other information included in a concise
company;
financial report must be consistent with the full
financial report of the entity. Where an entity is the g the nature and amount of each extraordinary item
parent entity in an economic entity, this Standard and the applicable income tax expense;
applies to the consolidated financial statements of h in respect of each event occurring after reporting date
the entity and the notes to those statements, and that does not relate to conditions existing at reporting
does not require that parent entity financial date, the information required by AASB 1002; and
information be provided. i where there is a change in accounting policy or
estimates from those used in the preceding financial
The Standard requires a concise financial report to
year which has a material effect in the current
include a:
financial year or is expected to have a material effect
a statement of financial performance; in a subsequent financial year, the information
required by AASB 1001.
b statement of financial position; and
c statement of cash flows. The concise financial report must also prominently
display advice to the effect that:
Each of the above statements must be presented in
the same manner as in the full financial report, in a the financial statements and specific disclosures
accordance with Accounting Standards, except for included in the concise financial report have been
the omission of cross-references to any notes to the derived from the full financial report; and
financial statements. Furthermore, a discussion b the concise financial report cannot be expected to
and analysis must accompany each statement. provide as full an understanding of the financial
performance, financial position and financing and
investing activities of the entity as the full financial
Disclosure Requirements
report.
The concise financial report must be disclose:
a notification when the financial report has not AASB 1040: Statement of Financial
been compiled on a going concern basis, or
where the going concern basis has become
Position (AAS 36)
inappropriate after the reporting date; This Standard applies to each entity that is required to
b segment revenue, segment results, segment prepare a financial report under Chapter 2M of the
assets and segment liabilities in respect to each Corporations Act 2001.
primary reporting segment in accordance with
AASB 1005 “Segment Reporting”; Presentation of Assets and Liabilities
c the amount of sales revenue recognised and
All assets and all liabilities must be categorised either as
included in operating revenue;
current or as non-current, or presented broadly in the
order of their liquidity where a liquidity presentation
provides more relevant and reliable information than
the current/non-current presentation.

72
“Current asset” is defined as an asset that is: b it is not probable that further breaches will occur
within 12 months of the reporting date; and
a expected to be realised, or held for sale or
consumption, in the normal course of the c in the absence of the breach, the liability would
entity’s operating cycle; not have been due for settlement within 12
months of the reporting date.
b held primarily for trading purposes or for the
short-term and is expected to be realised within
12 months of the reporting date; or Errors Made in Prior Periods
c cash or a cash equivalent asset which is not An error made in a prior reporting period which
restricted in its use beyond 12 months or the affects only amounts recognised in the statement
length of the operating cycle, whichever is of financial position must be corrected in the
greater. reporting period in which the error is discovered
“Current liability” is defined as a liability that: (assuming that the affected assets, liabilities or
items of equity are still recognised at the reporting
a arises and is expected to be settled in the normal date) unless the entity has amended and reissued
course of the entity’s operating cycle; or the financial report relating to the prior reporting
b is at call or due or expected to be settled within period.
12 months of the reporting date.
In circumstances where a single operating cycle of Disclosure of Fundamental Errors
the entity is not clearly identifiable or the operating
“Fundamental errors” are defined as “material
cycle is less than 12 months, a 12 month period
errors discovered in the current reporting period
must be used as the basis for the classification of
such that the financial report of one or more prior
assets and liabilities between current and non-
reporting periods cannot now be considered to
current.
have been reliable at the dates of their issue”.

Refinance of Long-Term Liabilities Fundamental errors must be corrected in the

reporting period in which they are discovered
Long-term interest bearing liabilities should unless the entity has amended and reissued the
continue to be classified as non-current, even if financial report relating to the prior reporting
they are due to be settled within 12 months of the period.
reporting date, when:
Where a fundamental error has been corrected in
a the original term was for a period of more than the current reporting period, the financial report
12 months; and
must disclose:
b the entity is committed to an agreement to
refinance, or to reschedule payments, prior to a the nature of the fundamental error; and
the time of completion of the financial report. b the amount of the correction of the fundamental
error relating to prior reporting periods.
Breach of Loan Covenants
Disclosure on the Face of Statement of
In the event that an undertaking, including a
Financial Position
covenant included in a borrowing agreement, is
breached by the entity, resulting in the liability The following classes of recognised items must be
becoming payable on demand, the liability must be disclosed separately on the face of the statement of
categorised as current unless: financial position:
a the lender has agreed, prior to the time of a assets: – cash assets, receivables, inventories,
completion of the financial report, not to investments accounted for using the equity
demand payment as a consequence of the method, other financial assets, property, plant
breach; and equipment, tax assets and intangible assets;

73
b liabilities: – payables, interest-bearing liabilities, c particulars of secured liabilities; and
tax liabilities and provisions; and d particulars of commitments for expenditure
c equity: – contributed equity, reserves, retained (other than commitments for the supply of
profits or accumulated losses and outside equity inventories).
interest.
3 Share, Units and Other Forms of Equity
Other Disclosure Requirements
The Standard requires the disclosure of the
following information:
1 Assets
a particulars of each class of shares:
The Standard requires the disclosure of the
i on issue as at the end of the financial year;
following information:
ii issued during the financial year; and
a particulars of assets that combine amounts iii bought back or cancelled during the financial
expected to be recovered through sale both year; and
within 12 months and 12 months or more from
b particulars of the opening balance, movements,
reporting date;
and the closing balance of retained profits or
b the amounts of reductions in the carrying accumulated losses, and reserves.
amounts of assets, including receivables and
depreciable assets, as a deduction from the
classes of assets to which they relate; AASB 1041: Revaluation Of Non-
c particulars of assets that exceed their net fair Current Assets
value by a material amount and are supported by
In December 1999, the AASB issued Accounting
guarantees, warranties or indemnities;
Standards AASB 1010 “Recoverable Amount of
d the carrying amount of any non-current assets Non-current Assets” and AASB 1041 “Revaluation
pledged as security for liabilities and the related of Non-current Assets”. These Standards are
existence and amounts of restrictions on title; operative for annual reporting periods beginning
e the carrying amount of non-current assets in the on or after 1 July 2000.
course of construction;
In July 2001, the AASB reissued AASB 1041
f particulars of land held for sale;
“Revaluation of Non-current Assets” which applies
g particulars of material investments in entities to annual reporting periods ending on or after 30
that are not subsidiaries or associates; and September 2001. The requirements of the revised
h particulars of the most recent valuations of land Standard, as summarized below, are largely
and buildings (other than land and buildings consistent with the requirements of the December
that are used in, or ancillary to, extractive 1999 version of AASB 1041.
industry operations and that possess a value that
is wholly dependent on those extractive industry
Measurement Basis
operations). The Standard requires such
valuations to be determined at least once every Subsequent to initial recognition, each class of
three years. non-current assets must be measured on either the
cost basis or fair value basis.
2 Liabilities
The Standard requires the disclosure of the Cost Basis
following information: Where a class of non-current assets is measured on
a particulars of liabilities that combine amounts the cost basis, in accordance with revised
expected to be settled both within 12 months and accounting standard AASB 1010 “Recoverable
12 months or more from reporting date; Amount of Non-Current Assets”, the entity must
apply the recoverable amount test to each asset
b particulars of short term obligations included in
non-current liabilities; within that class.

74
Fair Value Basis be recognised as a revenue in net profit or loss for
the reporting period in which the reversal occurs).
Where a class of non-current assets is measured on
Any increase in the carrying amount of the assets
the fair value basis, revaluations must be made
above the carrying amount that would have been
with sufficient regularity to ensure that the
determined for the assets had no recoverable
carrying amount of each asset within that class
amount write-down previously been recognised
does not differ materially from its fair value at the
must be accounted for as a revaluation increment
reporting date.
in accordance with the method detailed above.

Treatment of Revaluations Revaluation of Depreciable Assets

Revaluation increments and revaluation Where depreciable assets are revalued, any
decrements must be offset against one another balances of accumulated depreciation existing as at
within a class of non-current assets, but must not the revaluation date in respect of those assets must
be offset in respect of different classes of non- be credited to the asset accounts to which they
current assets. relate. The asset accounts must then be increased
The following accounting requirements apply to or decreased by the amount of the revaluation
the net revaluation increment or revaluation increments or revaluation decrements.
decrement arising on the revaluation of non- However, where an entity revalues depreciable
current assets in the reporting period: assets by reference to current prices for assets
a Generally, a net revaluation increment relating to newer than those being revalued, and adjusts those
a class of non-current assets must be credited amounts to reflect the present condition of the
directly to an asset revaluation reserve. However, assets, it may restate separately the gross amounts
to the extent that the increment reverses a and related accumulated depreciation of the assets
revaluation decrement previously recognised as comprising the class of revalued assets.
an expense in net profit or loss in respect of that
same class of non-current assets, it must be Disposal of Revalued Assets
recognised immediately as revenue in net profit
or loss; and The gain or loss on disposal of a non-current asset
must be measured as the difference between the
b Generally, a net revaluation decrement relating
to a class of non-current assets must be carrying amount of the asset as at the time of
recognised immediately as an expense in net disposal and the net proceeds, if any, from
profit or loss. However, to the extent, and only to disposal, and must be recognised in net profit or
the extent, that a credit balance exists in the loss for the reporting period in which disposal of
asset revaluation reserve in respect of that same the asset occurs.
class of non-current assets, the revaluation
decrement grossed up for any related recognised Changing the Measurement Basis for a
current tax and deferred tax must be debited Class of Non-Current Assets
directly to the asset revaluation reserve.
An entity is permitted to change from the cost
When an entity changes from applying the cost
basis to the fair value basis to measure a class of
basis to the fair value basis to measure a class of
non-current assets or may elect to discontinue
non-current assets for which a recoverable amount
revaluing a class of non-current assets, when and
write-down previously has been recognised, any
only when the change meets the criteria for a
increase in the carrying amount of the assets
voluntary change in accounting policy in AASB
comprising that class up to the carrying amount
1001/AAS 6 “Accounting Policies”. According to
that would have been determined for the assets had
AASB 1001/AAS6, a voluntary change in
no recoverable amount write-down previously been
accounting policy can only be made when and only
recognised must be accounted for as a reversal of
when it results in an overall improvement in the
the recoverable amount write-down (that is, it must
relevance and reliability of financial information
about the financial performance, financial position
and cash flow of the entity.

75
Where an entity discontinues revaluation, it must ii assets within that class which are not carried
measure the class of non-current assets at its at their fair value less, where applicable, any
carrying amount as at that date of discontinuing accumulated depreciation; and
revaluation less any subsequent accumulated b the basis or bases of valuation applied in respect
depreciation and subsequent accumulated of the amount disclosed.
recoverable amount write-downs or impairment
losses. Any balances of accumulated depreciation Discontinuation of Revaluations of a Class of
as at the date of discontinuation of revaluation Non-Current Assets
must be used as the basis for disclosing the gross
amount and any related accumulated depreciation Where an entity discontinues revaluation of a class
separately in accordance with AASB 1021/AAS 4 of non-current assets during the reporting period
“Depreciation”. and that change in accounting policy does not have
a material effect in the current reporting period
(that is, the reporting period in which the change
Disclosure Requirements was made), but will have a material effect in the
next reporting period, the financial report for the
Non-Current Assets Measured at Fair Value next reporting period need not disclose the
financial effect of the change in accounting policy as
Where the fair value basis is applied for measuring
would otherwise be required by AASB 1001/AAS 6.
a class of non-current assets, the financial report
must disclose in respect of each class of revalued
non-current assets: Other Disclosure Requirements
a the method(s) used in determining fair values; The financial report must disclose, in relation to
and each class of property, plant and equipment, a
b whether the revalued carrying amount has been reconciliation of the carrying amount at the
determined in accordance with an independent beginning and end of the reporting period,
valuation. showing:
Where the fair value basis is applied for measuring a additions;
a class of non-current assets, and the replacement b disposals;
cost of the asset’s remaining future economic
c acquisitions through acquisitions of entities or
benefits calculated using an index has been used to
operations;
determine the fair value of an asset within that
class, the financial report must disclose the nature d the net amount of revaluation increments less
of the index used. revaluation decrements;
e recoverable amount write-downs recognised in
The financial report must disclose the balance of accordance with AASB 1010;
the asset revaluation reserve and, if the entity is a
f reversals of recoverable amount write-downs;
profit-seeking entity, disclose any restrictions on
the distribution of the balance to owners. g depreciation expense;
h the net foreign currency exchange differences
Local Governments and Government arising on the translation of the financial
statements of a self-sustaining foreign operation;
Departments: Pre-Transfer Carrying Amount
and
Where a local government or government i other movements.
department recognises a class of non-current assets
that is measured on the fair value basis and that Comparative information is not required for the
class includes assets that are not measured at fair reconciliation of the carrying amount at the
value, its financial report must disclose: beginning and end of the reporting period.

a the aggregate carrying amount of each of the

following:
i assets within that class which are carried at
fair value less, where applicable, any
accumulated depreciation; and

76
Transitional Provisions previously been recognised must be credited
directly to retained profits or accumulated losses.
General Any net increase in the carrying amount of the
assets above the carrying amount that would
The accounting policies required by this Standard have been determined for the assets had no
must be applied as at the beginning of the recoverable amount write-down previously been
reporting period to which this Standard is first recognised must be credited directly to the asset
applied. revaluation reserve;
On first applying this Standard, an entity may elect b where paragraph (a) above does not apply:
to apply either of the following policies to a class of i any net revaluation increment arising upon
non-current assets that was carried on a cost basis revaluing those assets to their fair value as at
at the immediately preceding reporting period: that date must be credited directly to the asset
revaluation reserve except that, to the extent
a continue to apply to cost basis to that class of the net increment reverses a net revaluation
non-current assets in accordance with AASB decrement previously recognised as an
1041; expense in net profit or loss in respect of the
b apply the fair value basis in accordance with same class of non-current assets, it must be
AASB 1041, after making initial adjustments in credited directly to retained profits or
accordance with paragraph (a) under the heading accumulated losses; and
“Transition to the Fair Value Basis” below. ii any net revaluation decrement arising upon
On first applying this Standard, an entity may elect revaluing those assets to their fair value as at
to apply either of the following policies to a class of that date must, to the extent that a credit
non-current assets that was carried on a basis other balance exists in the asset revaluation reserve
than cost at the immediately preceding reporting in respect of that class of non-current assets,
date: be debited directly to the asset revaluation
reserve, and any remainder of the net
a continue to revalue the assets in that class of revaluation decrement must be debited
non-current assets in accordance with AASB directly to retained profits or accumulated
1041, after making initial adjustments in losses.
accordance with the transitional provisions
Where an entity applied AASB 1041/AAS 38
contained in paragraph (b) under the heading
(issued in December 1999) and changed from a
“Transition to the Fair Value Basis” below, if
revaluation basis to the cost basis for a class of
necessary; or
non-current assets, and elects to apply the fair
b revert to the cost basis in accordance with the value basis for that class of non-current assets on
transitional provisions outlined under the
first applying AASB 1041 (issued in July 2001), it
heading “Reverting from a Revaluation Basis to
must make adjustments that result in the carrying
the Cost Basis” below.
amounts of the class of non-current assets, the
asset revaluation reserve and retained profits or
Transition to the Fair Value Basis accumulated losses that would have been
Where, as at the date of first applying this recognised when this Standard is first applied if
Standard, an entity elects to initially apply the fair the entity had not previously changed to the cost
value basis of measuring a class of non-current basis.
assets:
a if the entity is changing from applying the cost Reverting from a Revaluation Basis to the Cost
basis to that class of non-current assets, and a Basis
recoverable amount write-down previously has
On first applying this Standard, an entity may elect
been recognised in respect of that class, any
to revert to the cost basis for measuring a class of
increase in the carrying amount of the assets
non-current assets that was carried at a revalued
comprising that class up to the carrying amount
amount at the immediately preceding reporting
that would have been determined for the assets
date by applying either of the following policies:
had no recoverable amount write-down

77
a deeming the carrying amount of the non-current it had always been measured using the cost basis,
assets comprising the class at the date of first any balances of accumulated depreciation and
applying this Standard to be their cost; or accumulated recoverable amount write-downs or
b making retrospective adjustments to measure impairment losses in respect of that class of non-
the non-current assets comprising the class at current assets as at the date of first applying this
their cost of acquisition less any accumulated Standard must be restated separately to the
depreciation and any accumulated recoverable amounts that would have been recorded in the
amount write-downs, as if they had always been accounting records if they had always been
measured using the cost basis. For that class of measured using the cost basis.
non-current assets, the resulting increments and
decrements to the carrying amounts of assets
must be recognised by making the following AASB 1042: Discontinuing
adjustments: Operations
i debiting the credit balance of the asset
The Standard was issued in August 2000 and
revaluation reserve for that class;
applies to annual reporting periods beginning on
ii directly adjusting retained profits or
or after 1 July 2001.
accumulated losses by the effect of previous
revaluations on the amount of accumulated
depreciation; and Discontinuing Operations
iii directly adjusting retained profits or A restructuring, transaction or other event must be
accumulated losses for any amounts not able reported as a discontinuing operation when, and
to be adjusted in accordance with paragraph only when, it meets the definition of a
(b)(i) above. discontinuing operation.
Where an entity elects to apply paragraph (a) above
“Discontinuing operation” means a major
to a class of non-current assets, any balances of
component of an entity:
accumulated depreciation and accumulated
recoverable amount write-downs or impairment a that the entity’s management or governing body
losses existing in respect of that class of non- has developed a single plan to:
current assets as at the date of first applying this i dispose of in its entirety through one or more
Standard must be used as the basis for disclosing transactions;
the gross amount and any related accumulated
ii abandon; or
depreciation separately in accordance with AASB
1021/AAS 4. Where an entity reverts to the cost iii terminate through a combination of one or
more transactions and abandonment;
basis of measurement by deeming the carrying
amount of non-current assets to be their cost b that represents a separate major activity or
(under paragraph (a) above) and that change in geographical area of operations; and
accounting policy does not have a material effect in c that can be separately identified for operational
the current reporting period (that is, the reporting and financial reporting purposes.
period in which the change was made), but will
have a material effect in the next reporting period, Recognition and Measurement
the financial report for the next reporting period
Assets, liabilities, revenues and expenses must be
need not disclose the financial effect of the change
attributed to a discontinuing operation in the
in accounting policy as would otherwise be
financial reports of the entity when, and only
required by AASB 1001/AAS 6.
when, they will be eliminated in the financial
Where, under paragraph (b) above, an entity elects reports of that entity when the operation is
to make retrospective adjustments to measure a discontinued.
class of non-current assets at its cost of acquisition
Assets, liabilities, revenues, expenses and cash
less any accumulated depreciation and any
flows attributed to a discontinuing operation must
accumulated recoverable amount write-downs, as if
be recognised and measured in accordance with
the requirements of other Standards.

78
All revenues and expenses arising from a ii the amounts of revenues, expenses and profit
discontinuing operation must be classified within or loss/result from ordinary activities before
ordinary activities, except that where an individual income tax expense (income tax revenue),
revenue or expense associated with a discontinuing together with the related income tax expense
operation meets the definition of an extraordinary (income tax revenue), attributed to the
item, that revenue or expense must be classified as discontinuing operation during the reporting
an extraordinary item. period; and
iii the amounts of net cash flows attributed to
each of the operating, investing and financing
Disclosure Requirements
activities of the discontinuing operation
during the reporting period; and
Initial Disclosure Event f for each reportable segment containing a
“Initial disclosure event” means the occurrence of discontinuing operation:
one of the following, whichever occurs earlier: i the carrying amounts as at the reporting date
of the total assets to be disposed of and the
a the entity has entered into a binding sale
total liabilities to be settled as part of the
agreement for all of the assets attributable to the
discontinuance; and
discontinuing operation; or
ii the amounts of revenues, expenses and profit
b the entity’s management or governing body has
or loss/result from ordinary activities before
both:
income tax expense (income tax revenue),
i approved a detailed formal plan for the together with the related income tax expense
discontinuance; and (income tax revenue), attributed to the
ii made an announcement of the plan; discontinuing operation during the reporting
such that it is highly unlikely that the entity will period.
withdraw from the discontinuance.
Disposal of Assets or Settlement of
Liabilities
Disclosure of the Discontinuing Operation
In relation to each discontinuing operation, when
For each discontinuing operation, the following
the entity enters into binding agreements for the
information must be disclosed in the financial
sale of assets or the settlement of liabilities
report for the reporting period in which the initial
attributed to the discontinuing operation, the
disclosure event occurs and in the financial report
financial report must disclose:
for each reporting period up to and including the
reporting period in which the operation is a the net selling price or range of prices of the net
discontinued: assets for which the entity has entered into one
or more binding sale agreements in the
a a description of the discontinuing operation; reporting period;
b the business segments, geographical segments b the expected timing of the related cash flows;
or, in the public sector, major activities in which and
the discontinuing operation is reported;
c the carrying amount of those net assets.
c the date and nature of the initial disclosure
event; In relation to each discontinuing operation, when
the entity disposes of assets or settles liabilities the
d the date on, or the period in which, the operation
financial report must disclose:
is expected to be discontinued, if known or
determinable, or that the period is not a the aggregate amount of any profit or loss/result
determinable; before income tax expense (income tax revenue)
e for the entity: for the reporting period that is recognised on the
disposal of assets or settlement of liabilities
i the carrying amounts as at the reporting date
attributed to the discontinuing operation; and
of the total assets to be disposed of and the
total liabilities to be settled as part of the b the aggregate income tax expense (income tax
discontinuance; revenue) related to the disposal of assets or
settlement of liabilities attributed to the
discontinuing operation.

79
Updating the Disclosures AASB 1043: Changes to the
In relation to each discontinuing operation, in Application of AASB and AAS
reporting periods subsequent to the one in which
Standards and other
the initial disclosure event occurs up to and
including the reporting period in which the amendments
operation is discontinued, the financial report must The Standard was issued in December 2000 and
disclose: applies to annual reporting periods and interim
a a description of any transactions, events or reporting periods ending on or after 31 December
activities relating to the discontinuing operation; 2000.
and The purpose of the Standard is to:
b a description of any changes during the
reporting period in the anticipated amount or a extend the application of certain Accounting
timing of cash flows relating to the assets to be Standards (AASB Standards) from companies
disposed of and the liabilities to be settled and and disclosing entities to entities to which AASB
the events causing those changes. Standards apply; and
b stipulate that entities need not comply with the
For each discontinuing operation that is not
annual reporting presentation and disclosure
discontinued in the annual reporting period
requirements of certain AASB Standards and
immediately following the annual reporting period
Australian Accounting Standards (AAS
in which the initial disclosure event occurred, the
Standards) when preparing interim financial
following must be disclosed in the financial report
reports in accordance with either Accounting
for each annual reporting period after the annual Standard AASB 1029 “Half-Year Accounts and
reporting period in which the initial disclosure Consolidated Accounts”, as issued in December
event occurred until the annual reporting period in 1994 or Accounting Standard AASB 1029
which the operation is discontinued: “Interim Financial Reporting”, as issued in
a the reasons for the extended period of October 2000.
discontinuation; and
b a description of the active plans for AASB 1044: Provisions,
discontinuation.
Contingent Liabilities and
Withdrawal from a Plan Contingent Assets
If the entity withdraws from a plan in relation to an This standard was issued in October 2001 and
operation that was previously reported as a applies to annual reporting periods beginning on
discontinuing operation, the financial report must or after 1 July 2002.
include an explanation of the withdrawal from the
plan. This explanation must include, but is not Provisions
limited to:
For a provision to exist, the entity must have a
a the reasons for the withdrawal; and present legal, equitable or constructive obligation to
b the effect of the withdrawal on the assets, make a future sacrifice of economic benefits to
liabilities, revenues and expenses of the entity. other entities as a result of past transactions or
other past events and the amount or timing of this
If the entity withdraws from a plan to discontinue
future sacrifice of economic benefits is uncertain.
an operation, the comparative information in the
Provisions can only be recognised when it is
financial report must be presented as if the
probable that the sacrifice of future economic
operation had never been discontinuing.
benefits will occur and the amount of the provision
can be reliably measured.

80
Recoveries Specific Applications
Where some or all of the economic benefits
required to settle a provision are expected to be Future Operating Losses
recovered from a third party, the recovery Estimated future operating losses are not liabilities
receivable must be recognised as an asset when it and cannot be recognised as a provision.
is probable that the recovery will be received and
the amount of the recovery receivable can be
reliably measured. The expense recognised in
Onerous Contracts
respect of the provision may be shown in the An onerous contract is defined as a contract under
statement of financial performance net of the which the entity’s unavoidable costs of meeting its
recovery. obligations under the contract exceed the economic
benefits to be received. The present obligation
Similarly, the provision and the related asset
arising from onerous contracts must be recognised
(recovery receivable) must be set-off and a net
and measured as a provision to the extent it
amount must be recognised in the statement of
exceeds the unrecognised assets.
financial position when the entity:
a has a legally recognised right to set-off the asset Restructuring Other than as Part of an
and the provision; and
Acquisition of an Entity or Operation
b intends to settle on a net basis or to realise the
asset and settle the provision simultaneously. Where a restructuring is not part of an acquisition
of another entity, a provision can only be
Contingent Liabilities and Contingent recognised when the entity has:
Assets a developed a detailed formal plan for the
restructuring identifying at least:
A contingent liability and contingent asset must
not be recognised in the statement of financial i the entity or operation concerned;
position. ii the principal locations affected;
iii the location, function and approximate
Measurement of Provisions number of employees who will be
compensated for terminating their services or
The amount recognised as a provision must be the changing their terms and conditions of
best estimate of the consideration required to settle employment;
the present obligation as at the reporting date,
iv the future sacrifices of economic benefits that
taking into account the risks and uncertainties that will be made; and
surround the events and circumstances that affect
v when the plan will be implemented; and
the provision. Future events expected to affect the
consideration required to settle the present b taken either or both of the following actions:
obligation must be reflected in the amount i entered into firm contracts to carry out
provided, when there is reliable evidence that the features of the restructuring, the penalty
future event will occur. Gains expected from provisions of which leave the entity with no
disposal of assets cannot be taken into account in realistic alternative but to proceed with the
measuring a provision. restructuring; and
ii raised a valid expectation in those affected by
Where an entity measures a provision by
the restructuring that it will carry out the
estimating cash flows, its carrying amount must be
restructuring by starting to implement the
the present value as at the reporting date of those detailed formal plan or announcing the main
cash flows. The discount rate to be used must be features of the plan to those affected by it (or
the pre-tax rate that reflects current market representatives). As a consequence, the
assessments of the time value of money and the affected parties can be expected to act in a
risks specific to the liability. manner such that the entity has no realistic
alternative but to proceed with restructuring.

81
Provisions for restructuring must only include Dividends
those costs that are directly and necessarily A liability must be recognised for dividends
caused by the restructuring and must not include declared, determined or publicly recommended on
termination benefits or any costs associated with or before the reporting date.
the ongoing activities of the entity.
If the dividends are declared, determined or
publicly recommended by the time of completion
Restructuring as Part of an Acquisition of an but not on or before the reporting date, a liability
Entity or Operation must not be recognised. However, this amount
Where a restructuring is part of an acquisition of must be disclosed in the financial report.
another entity, a provision for restructuring exists
when the acquirer has: Disclosure Requirements
a at or before the date of acquisition, developed The financial report must disclose the following
the main features of a plan that involves information concerning provisions:
restructuring the activities of the acquiree and
a a brief description of the nature of the present
relates to:
obligation and of any significant uncertainty
i closing facilities of the acquiree; about the amount of the future sacrifice of
ii eliminating product or service lines of the economic benefits and the amount of any related
acquiree; or estimated recovery for each class of provisions;
iii terminating contracts of the acquiree that and
have become onerous because the acquirer b movements during the reporting period of each
has communicated to the other party at or class of provisions.
before the date of acquisition that the contract
When making the above disclosure, the provisions
will be terminated;
for restructurings and liabilities for termination
b by the earlier of three months after the date of benefits must be treated as a separate class of
acquisition and the time of completion of the provisions. In addition, the carrying amount as at
annual financial report, developed the main the reporting date for these items must be
features of the plan described above into a
separately disclosed for each acquisition.
detailed formal plan (as described above); and
c at or before the date of acquisition entered into The financial report must disclosure the following
firm contracts to carry out the restructuring (as information concerning contingent assets and
described above) and raised a valid expectation contingent liabilities:
in those affected that it will carry out the a a brief description of the nature of the
restructuring (as described above). contingent liabilities and contingent assets;
A provision for restructuring must be recognised b an indication of the uncertainties in the timing
by the acquiree as at the date of acquisition and and amount of any future sacrifice or inflow of
taken into account by the acquirer in measuring economic benefits;
the fair value of identifiable net assets acquired
c an estimate of the potential effect, measured in
when:
the same way as is required for provisions; and
a the acquiree has satisfied the conditions outlined d for each class of contingent liabilities, the
above; and existence and amount of any possible recovery.
b it is probable a future sacrifice of economic
benefits will be required and the amount of the
provision can be reliably measured.

82
AASB 1045: Land Under Roads
This standard was issued in October 2002 and
applies to annual reporting periods ending on or
after 31 December 2002. The standard applies to
general purpose financial reports of local
governments, government departments and
Commonwealth, State and Territory Governments.
The standard alters the expiry date of the land
under roads transitional provisions in Australian
Accounting Standards AAS 27A “Amendments to
the Transitional Provisions of AAS 27”, AAS 29A
“Amendments to the Transitional Provisions of
AAS 29” and AAS 31A “Amendments to the
Transitional Provisions of AAS 31” from 31
December 2002 to 31 December 2006.

83
Part Four – Australian Accounting
Standards (AAS)
Background Despite the move towards a single set of
Accounting Standard in August 2001, the AASB
Prior to August 2000, Australian Accounting did not withdraw or reissue all existing AAS as
Standards (AAS) were issued jointly by the Institute AASB. AAS are only superseded once a revised
of Chartered Accountants in Australia (ICAA) and AASB standard has been issued.
the then Australian Society of Certified Practising
Accountants (now known as CPA Australia). AAS Part 3 of this guide identifies the comparative AAS
apply to general purpose financial reports of all relating to each AASB. Significant differences
entities that are not required to comply with AASB between the AASs and the corresponding AASBs
Accounting Standards. (if any) are detailed below.

In August 2000 the AASB commenced the issue

of Standards in a format that combines the formats AAS 22: Related Party Disclosures
previously used in AASB Standards and AAS
Standards in order to move towards the issue of a
(AASB 1017)
single series of Standards. That is, Standards now Similar to AASB 1017, except in relation to the
issued by the AASB will have application to disclosure of directors’ remuneration, payments
reporting entities required to prepare financial made to directors and executives in connection
reports under Part 2M.3 of the Corporations Act with retirement from office, and directors’ loans.
2001, and general purpose financial reports of
other reporting entities (that is, entities that
previously would have applied AASs). AAS 25: Financial Reporting by
At the date of this publication, Standards that have Superannuation Plans
been released in the combined format are:
Application
• AASB 1005 “Segment Reporting”;
The Standard applies to each superannuation plan
• AASB 1012 “Foreign Currency Translation”;
in the private or public sector that is a reporting
• AASB 1018 “Statement of Financial entity, and as such would not normally apply to
Performance”; single member plans.
• AASB 1027 “Earnings Per Share”;
AAS 25 applies to both:
• AASB 1028 “Employee Benefits”;
• AASB 1029 “Interim Financial Reporting”; a defined contribution plans – where amounts
paid on normal retirement are determined by
• AASB 1041 “Revaluation of Non-current Assets” reference to accumulated contributions and
(June 2001); investment earnings; and
• AASB 1042 “Discontinuing Operations”; b defined benefit plans – where amounts paid on
• AASB 1043 “Changes to the Application of AASB normal retirement are determined, in part, by
and AAS Standards and Other Amendments”; reference to a formula based on years service
• AASB 1044 “Provisions, Contingent Liabilities and/or salary levels.
and Contingent Assets”; and
• AASB 1045 “Land Under Roads”.

84
Requirements for each type of plan are as follows: 3 Treatment of Assets
Assets are measured at net market values, as per
Defined Contribution Plans Defined Contribution Plans.

The Standard is very comprehensive and complex

1 Financial Reporting and reference should be made to it for more
The financial report comprises: detailed guidance.

a Statement of Financial Position;

Disclosure Requirements
b Statement of Cash Flows; and
c Accompanying Notes The following disclosures are required (Note:
Disclosure required only for the Defined
An exception exists for plans whose only assets are
Contribution Plans (DCP) or the Defined Benefit
endowment, whole of life or other long term
Plan (DBP) are indicated as appropriate.)
insurance policies.
In the Statement of Financial Position (DCP) or
2 Treatment of Accrued Benefits Statement of Net Assets (DBP):

Accrued benefits are required to be shown as a assets, showing separately investments and other
liabilities and are measured as the difference assets by class;
between the carrying amount of all assets and all b liabilities:
“other” liabilities of the plan. i for DCP – showing separately liability for
accrued benefits and other liabilities by class;
3 Treatment of Assets or
ii for DBP – showing separately each class of
Assets are measured at net market values, any
liability but excluding liability for accrued
changes that occurs in net market values are benefits;
recognised in net profit or loss in the period it
c by note or otherwise, accrued benefits allocated
arises.
to members’ accounts and the amount not yet so
allocated (DCP only);
Defined Benefit Plans d net assets available to pay benefits (DBP only);
and
1 Financial Reporting e by note:
The financial report comprises: i liability for accrued benefits and the date it
was measured (DBP only);
a Statement of Net Assets; and
ii changes in liability for accrued benefits (DCP
b Statement of Changes in Net Assets.
only);
Where accrued benefits are measured at the end of iii changes in liability for accrued benefits where
the period there is an option to use the Defined accrued benefits were measured in the
Contribution Plan reporting requirements. period, the benefits accrued since the last
measurement date (DBP only);
2 Treatment of Accrued Benefits iv vested benefits;
Accrued benefits are required to be measured, v payments by new entrants as consideration
using actuarial assumptions and valuations where for additional benefits (DBP only);
appropriate, as the present value of expected future vi any benefits guaranteed, identity of guarantor,
payments arising from membership of the plan. nature of guarantee and any changes from
previous period; and
vii method for determining market values of
each class of asset.

85
In the Operating Statement (DCP) or Statement of Trustees’ Report
Changes in Net Assets (DBP)
The discussion paragraphs of the Standard
a revenue, showing separately: recommend that the financial statements be
i amount of net assets available for benefits at accompanied by a trustees’ reporting containing:
beginning and end of period (DBP only); a comments on investment performance and
ii investment revenue and its individual policies of the fund;
components (including changes in net b details of significant features of the operations;
market values of investments for each class);
c confirm that the trust deed has been complied
iii contributions by employees;
with or state which requirements were not
iv contributions by employers; complied with; and
v changes in net market value of other assets d include a formal statement as to the fairness of
(DBP only); presentation of the financial statements.
vi other revenue (including proceeds from term
insurance policies);
AAS 27: Financial Reporting by
vii direct investment, general administration and
income tax expenses; Local Governments
viii benefits accrued during period (DCP only);
and Purpose
ix benefits paid (DBP only); and The purpose of this Standard is to set out
b by way of note: standards for the form and content of general
i separately, change during the reporting purpose financial reports (GPFRs) of local
period in net market value of investments governments. To the extent that the requirements
held at the reporting date, other assets held at of this Standard differ from the requirements of
the reporting date and of investments and other Australian Accounting Standards, the
other assets realised during period; and requirements of this Standard shall be applied.
ii rate or other basis of contributions by
employers and members, and any change Preparation of General Purpose Financial
over previous period. Reports
The appendices to the Standard give detailed
GPFRs shall be prepared in accordance with
examples of the financial statement formats.
Australian Accounting Standards, other than AASB
1005 “Segment Reporting” and AAS 22 “Related
Actuarial Information – Defined Benefit Party Disclosures”.
Plans
Consolidated financial statements shall be prepared
Defined benefit plans are required to append to as required by and in accordance with AAS 24
their financial statements a copy or summary of “Consolidated Financial Reports”.
the most recent actuarial report, detailing:
a effective date of the report; Contents of General Purpose Financial
b name and qualifications of the actuary; Statements
c relationship of the market value of assets to The GPFR shall include an operating statement, a
aggregate vested benefits; and statement of financial position, a statement of
d opinion of the actuary as to the financial changes in equity and a statement of cash flows.
condition of the plan.

86
Recognition of Assets, Liabilities, Revenues recovered from revenues attributable to such
and Expenses functions and activities. These include disclosures
in relation to:
The recognition of assets, liabilities, revenues and
expenses is consistent with SAC 4 “Definition and a assets and liabilities transferred to the local
Recognition of the Elements of Financial government for no cost or for nominal
Statements“. Where assets are acquired at no cost consideration, and the identity of the transferor
or for nominal consideration, they must initially be local government;
recognised at their fair value as at the date of b restricted assets;
acquisition. c conditions of contributions;
However, where for assets that are acquired as a d nature and financial effect of any non-
consequence of a restructure of administrative compliance with externally imposed
arrangements, they may initially be recognised at requirements; and
the amounts at which they were recognised by the e performance indicators.
transferor government department at the date of
In addition to the above disclosures, the revised
the transfer, or at their fair values.
Standard requires the disclosure of capital
For assets and liabilities arising from agreements expenditure commitments contracted for as at the
which are equally proportionately unperformed, a reporting date.
local government may elect not to recognise them
in the statement of financial position. Frequency, Timeliness and Availability of
Assets, liabilities, revenues and expenses shall be GPFRs
classified according to their nature and type in the A GPFR must be prepared at least annually and
GPFR by way of note or otherwise. In addition, made readily available to users on a timely basis.
assets and liabilities shall be classified into current The local government shall publicly inform the
and non-current categories. local government community of the availability of
Each class of equity shall be disclosed separately, by the report.
way of note or otherwise.
Transitional Provisions
Other Guidance Although local governments are encouraged to
The Standard also prescribes the methods to be apply the full provisions of this Standard, they may
adopted when accounting for: elect not to recognise land under roads as an asset
in the statement of financial position.
a depreciation of non-current assets;
During the transitional period, where a local
b contributions (other than contributions by
government elects not to recognise land under
owners); and
roads as an asset in the statement of financial
c revaluations of non-current assets. position, it must disclose that policy in the
summary of accounting policies.
Disclosure Requirements
These transitional provisions shall apply from the
There are a number of disclosure requirements for commencement of the reporting period to which
local governments which are designed to assist this Standard is first applied, until the end of the
users in identifying the resources committed to first reporting period ending on or after
particular functions and activities, the costs of 31December 2006.
service delivery of such functions and activities,
and the extent to which those costs have been

87
Where land under roads is first recognised in the The GPFR shall encompass all entities controlled by
statement of financial position, or its recognition is the government department and shall be prepared in
discontinued, during the transitional period accordance with AAS 24 “Consolidated Financial
specified above, the net amount of the resultant Reports”.
adjustments shall be adjusted against accumulated
surplus/deficiency in the reporting periods in Contents of the General Purpose Financial
which the assets are first recognised or their
Reports
recognition is discontinued. If subsequently, the
recognised amounts of land under roads are The GPFR shall include an operating statement, a
revised during the transitional period specified statement of financial position and a statement of cash
above to reflect a reassessment of the factors used flows.
to determine those recognised amounts, the net
amount of the resultant adjustments shall be Recognition of Assets, Liabilities, Revenues and
adjusted against accumulated surplus/deficiency in Expenses
the reporting periods in which the recognised
amounts are revised. The recognition of assets, liabilities, revenues and
expenses is consistent with SAC 4 “Definition and
Recognition of the Elements of Financial Statements”.
AAS 29: Financial Reporting by Where assets are acquired at no cost or for nominal
consideration, they shall initially be recognised at their
Government Departments
fair value as at the date of acquisition. However, where
these assets are acquired as a consequence of a
Purpose restructure of administrative arrangements, they may
The purpose of this Standard is to set out initially be recognised at the amounts at which they
standards for the form and content of general were recognised by the transferor government
purpose financial reports (GPFRs) of government department at the date of the transfer.
departments.
Assets, liabilities, revenues and expenses shall be
classified according to their nature and type in the
Key Definitions GPFR by way of note or otherwise. In addition, assets
“Government departments” are defined as and liabilities shall be classified into current and non-
government controlled entities, created pursuant to current categories.
administrative arrangements or otherwise For assets and liabilities arising from agreements
designated as a government department by the which are equally proportionately unperformed, a local
government which controls it. government may elect not to recognise them in the
statement of financial position.
Preparation of General Purpose Financial
Reports Other Guidance
GPFRs shall be prepared in accordance with The Standard also prescribes the methods to be
Australian Accounting Standards, other than AASB adopted when accounting for:
1005 “Segment Reporting” and AAS 22 “Related
a revaluation of non-current assets;
Party Disclosures”. To the extent that the
requirements of this Standard differ from the b depreciation of non-current assets;
requirements of other Australian Accounting c user charges, fines and fees;
Standards, the requirements of this Standard shall d parliamentary appropriations;
be applied.
e revenues and expenses resulting from restructuring
The GPFR shall disclose the identity of the of administrative arrangements;
legislation or other authority pursuant to which the f contributions such as grants, donations and gifts;
GPFR has been prepared. and
g contributions by owners and distributions to owners.

88
Disclosure Requirements the corresponding adjustment must be made
against accumulated surplus/deficiency. The nature
There are a number of disclosure requirements for
and amount of each adjustment made during the
government departments which are designed to
reporting period must be disclosed in the financial
assist users in evaluating the efficiency and
report.
effectiveness of the government department. These
include disclosures in relation to:
Comparative Information
a restricted assets;
Comparative information does not need to be
b conditions of contributions;
disclosed for service costs and achievements where
c changes in equity; a significant change in the basis upon which that
d compliance with parliamentary appropriations information is determined makes disclosures of
and other externally imposed requirements; comparative information impractical.
e service costs and achievements;
f activities transferred from one government
AAS 31: Financial Reporting by
department to another;
g administration revenues, expenses, assets and
Governments
liabilities; and
h performance indicators.
Purpose
The purpose of this Standard is to set out
Frequency, Timeliness and Availability of standards for the form and content of general
GPFRs purpose financial reports (GPFRs) of
Commonwealth, State and Territory Governments.
A GPFR must be prepared at least annually and
made available to users on a timely basis.
Preparation of General Purpose Financial
Reports
Transitional Provisions
GPFRs shall be prepared in accordance with
Although government departments are encouraged
Australian Accounting Standards, other than AASB
to apply the full provisions of this Standard, they
1005 “Segment Reporting” and AAS 22 “Related
may elect, until the end of the first reporting period
Party Disclosures”. To the extent that the
ending on or after 31December 2006, not to
requirements of this Standard differ from the
recognise land under roads as an asset in the
requirements of other Australian Accounting
statement of financial position. Where a
Standards, the requirements of this Standard shall
government department elects not to recognise
be applied.
land under roads as an asset in the statement of
financial position, it must disclose that policy in The GPFR must disclose the identity of the
the summary of accounting policies. legislation or other authority pursuant to which the
GPFR has been prepared.
Where a government department:
The GPFR must encompass all entities controlled
a elects not to recognise land under roads in
by the government and shall be prepared in
accordance with the above transitional provisions
and then subsequently recognises that asset; or accordance with AAS 24 “Consolidated Financial
Reports”.
b before 30 June 2000, recognises a pre-existing
but previously unidentified asset or liability for
the first time or makes a correction to an Contents of the General Purpose Financial
amount previously recognised as an asset or Reports
liability; or
The GPFR must include an operating statement, a
c derecognises land under roads in order to adopt statement of financial position and a statement of
the above transitional provisions; cash flows.

89
Recognition of Assets, Liabilities, Revenues The disclosure requirements of the following
and Expenses Australian Accounting Standards do not apply where
the requirements of this Standard are adopted:
The recognition of assets, liabilities, revenues and
expenses is consistent with SAC 4 “Definition and a disclosure of transfers to and from reserves (AAS 1);
Recognition of the Elements of Financial b separate disclosure of the capital, retained surplus or
Statements”. Where assets are acquired at no cost accumulated deficit, and reserves comprising the
or for nominal consideration, they shall initially be outside equity interest (AAS 24); and
recognised at their fair value as at the date of
c the disclosure of details regarding unused loan and
acquisition. credit facilities (AAS 28).
Assets, liabilities, revenues and expenses must be
classified according to their nature and type in the Frequency, Timing and Availability of GPFRs
GPFR by way of note or otherwise. In addition, A GPFR must be prepared at least annually and made
assets and liabilities must be classified into current readily available to users on a timely basis.
and non-current categories.

Each class of equity shall be disclosed separately, by Transitional Provisions

way of note or otherwise.
Although governments are encouraged to apply the full
For assets and liabilities arising from agreements provisions of this Standard, they may elect, until the
which are equally proportionately unperformed, a end of the first reporting period ending on or after 31
government may elect not to recognise them in the December 2006, not to recognise land under roads as
statement of financial position. an asset in the statement of financial position. Where a
government elects not to recognise land under roads as
Other Guidance an asset in the statement of financial position, it must
disclose that policy in the summary of accounting
The Standard also prescribes the methods to be policies.
adopted when accounting for:
Where a government:
a depreciation of non-current assets;
a elects not to recognise land under roads in
b contributions (other than contributions by
accordance with the above transitional provisions
owners); and
and then subsequently recognises that asset; or
c revaluations of non-current assets.
b in reporting periods ending on or before 30 June
2001, recognises a pre-existing but previously
Disclosure Requirements unidentified asset or liability for the first time or
There are a number of disclosure requirements for makes a correction to an amount previously
governments which are designed to assist users in recognised as an asset or liability; or
evaluating the efficiency and effectiveness of the c derecognises land under roads in order to adopt the
government. These include disclosures in relation above transitional provisions;
to: the corresponding adjustment must be made against
a the accounting policies adopted for recognising accumulated surplus/deficiency. The nature and
each major type of tax revenue; amount of each adjustment made during the reporting
period must be disclosed in the financial report.
b liabilities that fail the recognition criteria;
c capital expenditure commitments contracted for
as at the reporting date; Comparative Information
d the net cash flows of government-controlled Comparative information is not required to be
financial institutions; disclosed for disaggregated information in respect of
e disaggregated information relating to the broad sectors of activity where a significant change in
financial performance and financial position the basis upon which that information is determined
showing the government’s activities and other makes disclosure of the comparative information
items relevant to users’ needs; and impractical.
f performance indicators.

90
Part Five – Urgent Issues Group
Consensus Views
Urgent Issues Group Consensus Views
The Urgent Issues Group (UIG) was established in 1994 by the Institute of Chartered Accountants
in Australia (ICAA), the then Australian Society of Certified Practicing Accountants (now known as
CPA Australia), the Australian Accounting Standards Board (AASB) and the Public Sector
Accounting Standards Board (PSASB). Following amendments to the Corporations Act 2001, the
UIG was reestablished on 1 January 2000 as a committee of the AASB.

The UIGs terms of reference are to review on a timely basis and within the context of existing
Accounting Standards and Statements of Accounting Concepts, accounting issues that are likely to
receive divergent or unacceptable treatment in the absence of authoritative guidance, with the view
to reaching a consensus as to the appropriate accounting treatment.

91
UIG Abstracts
The following table lists UIG Abstracts currently on issue.

Number Subject

Abstract 1 Lessee Accounting for Surplus Leased Space under a Non-cancellable Operating Lease
Abstract 2 Accounting for Non-vesting Sick Leave
Abstract 3 Lessee Accounting for Lease Incentives Under a Non-Cancellable Operating Lease
Abstract 4 Disclosure of Accounting Policies for Restoration Obligations in the Extractive Industries
Abstract 6 Accounting For Acquisitions – Deferred Settlement of Cash Consideration
Abstract 7 Accounting For Non-Current Assets – Derecognition of Intangible Assets and Change in the Basis of
Measurement of a Class of Assets
Abstract 8 Accounting for Acquisitions – Recognition of Restructuring Costs as Liabilities
Abstract 9 Accounting for Acquisitions – Recognition of Acquired Tax Losses
Abstract 10 Accounting for Acquisitions – Gold Mining Companies
Abstract 11 Accounting for Contributions of, or Contributions for the Acquisition of, Non Current Assets
Abstract 12 Accounting for the Costs of Modifying Computer Software for the Year 2000
Abstract 13 The Presentation of the Financial Report of Entities Whose Securities are “Stapled”
Abstract 14 Directors’ Remuneration
Abstract 15 Early Termination of Foreign Currency Hedges
Abstract 16 Accounting for Share Buy-Backs
Abstract 17 Developer and Customer Contributions in Price Regulated Industries
Abstract 18 Early Termination of Gold Hedges
Abstract 19 The Superannuation Contributions Surcharge
Abstract 20 Equity Accounting – Elimination of Unrealised Profits and Losses on Transactions with Associates
Abstract 21 Consistency – Different Cost Formulas for Inventories
Abstract 22 Accounting for the Buy-Back of No Par Value Shares
Abstract 23 Transaction Costs Arising on the Issue or Intended Issue of Equity Instruments
Abstract 24 Equity Accounting – Carrying Amount of an Investment in an Associate
Abstract 25 Redesignation of Hedges
Abstract 26 Accounting for Major Cyclical Maintenance
Abstract 27 Designation as Hedges – Sold (Written) Options
Abstract 28 Consolidation – Special Purpose Entities
Abstract 29 Early Termination of Interest Rate Swaps
Abstract 30 Depreciation of Long-Lived Physical Assets, including Infrastructure Assets: Condition-Based
Depreciation and Other Related Methods
Abstract 31 Accounting for the Goods and Services Tax (GST)
Abstract 32 Designation as Hedges – Rollover Strategies
Abstract 33 Hedges of Anticipated Purchases and Sales
Abstract 34 Acquisitions and Goodwill – First-Time Application of Accounting Standards
Abstract 35 Disclosure of Contingent Liabilities
Abstract 36 Non-Monetary Contributions Establishing a Joint Venture Entity
Abstract 37 Accounting for Web Site Costs
Abstract 38 Contributions by Owners Made to Wholly-Owned Public Sector Entities
Abstract 39 Effect of Tax Consolidation Proposals on Deferred Tax Balances
92
Abstract 40 Non-Reciprocal Transfers within an Economic Entity for Monetary or No Consideration
Abstract 41 Fair Value of Equity Instruments Issued as Purchase Consideration
Abstract 42 Subscriber Acquisition Costs in the Telecommunication Industry
Abstract 43 Classification of Financial Instruments with Conversion Options
Abstract 44 Acquisition of in-process research and development
Abstract 45 Subsidiary becomes a joint venture entity or an associate
Abstract 46 Initial Foreign Currency Translation for Redomiciled Entities
Abstract 47 Professional Indemnity Claims Liabilities in Medical Defence Organisations
Abstract 48 Status of Tax Consolidation Legislation
Abstract 49 Revenue - Barter Transactions involving Advertising Services
Abstract 50 Evaluating the Substance of Transactions involving the Legal Form of a Lease
Abstract 51 Recovery of Unfunded Superannuation of Universities
Abstract 52 Income Tax Accounting Under the Tax Consolidation System

93
Abstract 1: Lessee Accounting for Abstract 2: Accounting for Non-
Surplus Leased Space under a Vesting Sick Leave
Non-Cancellable Operating Lease
Application and Operative Date
Application and Operative Date This consensus applies to all reporting entities for
This consensus applies to all reporting entities for reporting periods ended on or after 30 June 1995.
reporting periods ended on or after 2 September
1995. Consensus Reached
The liability for accumulated non-vesting sick leave
Consensus Reached shall be based on the amount of the accumulated
1 When a lease is non-cancellable and future sick leave entitlement existing at the measurement
payments thereunder are for surplus space, a date for which it is probable that the reporting
liability and an expense shall be recognised. entity will be required to sacrifice economic
benefits in the future.
2 The amount recognised in accordance with point
1 above, shall be the total expected outlay relating Where experience indicates that, on average, sick
to the surplus space as specified under the lease, leave taken each reporting period is less than the
discounted using the interest rate implicit in the entitlement accruing in that period, and this
lease or an estimate thereof (ie. by reference to experience is expected to recur in future reporting
the fair value of the leased asset, the term of the periods, it shall be considered improbable that
lease, and the lease payments). existing accumulated entitlements will be used by
3 When the leased space is sub-let at a loss, the employees and therefore no liability would be
amount of the liability and the expense recognised.
recognised in accordance with 1 and 2, above,
shall be determined net of any probable sub- Unused entitlements existing at the end of the
lease revenue (such revenue should also be reporting period shall be considered to give rise to
discounted using the discount rate applied to the a liability only when it is probable that sick leave
expected outlays per 2, above). taken in the future will be greater than
entitlements that will accrue in the future.
4 The liability and the expense shall be recognised
in the reporting period in which it is first
determined that it is probable that the space will
be of no substantive future benefit to the lessee
Abstract 3: Lessee Accounting for
and any rental revenue from a sub-lease of the Lease Incentives under Non-
space will be lower than the rental the entity is Cancellable Operating Leases
presently obliged to pay under the original lease.
5 If the space is to be used between the time at Application and Operative Date
which the loss becomes probable and when the
space becomes surplus, the lease expense for the This consensus applies to all reporting entities in
use over that period shall be determined as if the respect of non-cancellable leases entered into on or
leased space was to be used over the term of the after 6 July 1995.
lease. The amount of this lease expense shall be
allowed for in determining the liability and the
Consensus Reached
expense to be recognised at the time of
assessment of a probable loss. 1 A lease incentive is the financing of the lessee’s
entry into a lease and is repaid by the lessee out
of the future lease payments that are higher than
they would be had no incentive been provided.

94
 Therefore, the incentive is, in substance, a ii whether the amount of restoration obligations
borrowing (liability) which will be repaid by the recognised includes the costs of reclamation,
lessee as part of the future lease rentals. platform removal, plant closure, waste site
2 The lease incentive shall be recognised as a closure, monitoring or other activities and,
liability. where material, the nature of those activities;
iii whether restoration costs are estimated on
3 The liability recognised in respect of the lease
the basis of current costs or estimates of
incentive shall be reduced by allocating lease
future costs, current or anticipated legal
rental payments between interest (calculated by
requirements and current or anticipated
applying the interest rate implicit in the lease or
an estimate thereof to the outstanding liability),
rental expense and reduction of the liability. iv whether the amounts of restoration costs
have been determined on a discounted or
4 The allocation of lease rental payments shall be
undiscounted basis; and
made such that rental expense is recognised on a
basis which is representative of the pattern of c significant uncertainties, assumptions and
benefits derived from the rental property (In the judgements made in determining restoration
absence of evidence to the contrary, this would obligations.
be on a straight line basis). It should be noted that this UIG Abstract deals
5 The financial report shall include a description with disclosure requirements only. It does not deal
of the method used for reducing the liability. with the recognition and measurement of
restoration obligations.

Abstract 4: Disclosure of
Accounting Policies for Abstract 5: Methods of
Restoration Obligations in the Amortisation of Goodwill
Extractive Industries The requirements set out in Abstract 5 were
withdrawn in August 1996 following the reissue of
Application and Operative Date accounting standards AASB 1013 and AAS 18
“Accounting for Goodwill”.
This consensus applies to all reporting entities for
reporting periods ended on or after 6 October
1995. Abstract 6: Accounting for
Acquisitions – Deferred
Consensus Reached Settlement Cash Consideration
The financial report of reporting entities in the
extractive industries shall disclose: Application and Operative Date
a the amount of restoration obligations recognised This consensus applies to all reporting entities for
as a liability; acquisitions made on or after 16 November 1995.
b the accounting method adopted in determining
the liability for restoration, including: Consensus Reached
i whether the total amount of restoration
When settlement of all or any part of the cash
obligations is recognised at the time a
consideration given in the acquisition of an asset is
disturbance occurs, is recognised on a
deferred, the fair value of the purchase
gradual basis over the life of the facility as
production occurs or is recognised on some
consideration must be determined by discounting
other basis; the amounts payable in the future to their present
value as at the date of acquisition.

95
The discount rate to be used in discounting the Consensus Reached
amounts payable in the future to their present
1 Restructuring costs are costs which:
value is the rate at which the acquirer could obtain
similar borrowing under comparable terms and a arise directly as a result of the acquisition of
an entity or part thereof;
conditions.
b arise only as a consequence of restructuring
the activities of the acquired entity or part
Abstract 7: Accounting for Non- thereof; and
Current Assets – Derecognition of c do not generate additional revenues for the
combined entity or result in the creation of an
Intangible Assets and Change in identifiable asset.
the Basis of Measurement of a 2 A liability for restructuring costs must be
Class of Assets recognised as at the date of acquisition when,
and only when:

Application and Operative Date a as at the date of acquisition, the entity is

demonstrably committed to the restructuring
The consensus applies to all reporting entities from such that it has little or no discretion to avoid
30 January 1996. payments to other parties in settlement of the
costs of the restructuring; and
Consensus Reached b a reliable estimate of the amount of the
liability as at the date of acquisition can be
An internally generated non-current intangible
made.
asset must be derecognised when, and only when:
3 Provisions for future operating losses of the
a it no longer satisfies the definition of an asset; acquired or acquiring entity, or a part thereof,
b it is no longer probable that the future economic must not be recognised as a liability.
benefits embodied in the asset will eventuate; or 4 A revision to the estimated amount of
c the value of the asset, determined consistent restructuring costs recognised as a liability must
with the valuation basis applied in determining be accounted for by adjusting the amount of the
the carrying amount of the asset, can no longer liability and the amount of goodwill or the
be determined reliably. discount on acquisition.

A change in the basis of measurement adopted for Consequential adjustments to reflect the
a class of non-current assets must be accounted for cumulative effect of revisions on the amount of
amortisation of goodwill must be recognised in
as a revaluation as defined in accounting standards
net profit or loss in the reporting period in
AASB 1041 “Revaluation of Non-Current Assets”.
which the revision in the estimate occurs.
In the case of a discount on acquisition,
Abstract 8: Accounting for consequential adjustments to reflect the
cumulative effect of revisions to the amount of
Acquisitions – Recognition of depreciation of non-monetary assets acquired
Restructuring Costs as Liabilities and other revenues and expenses recognised in
previous reporting periods must be recognised
Application and Operative Date in net profit or loss in the reporting period in
which the revision in the estimate occurs.
This consensus applies to all reporting entities in
respect of acquisitions made on or after 6 June
1996.

96
5 The following must be disclosed separately: In the case of a discount on acquisition,
a the amount of the liability for the costs of consequential adjustments to reflect the
restructuring; cumulative effect of revisions to the amount of
depreciation of non-monetary assets acquired
b any revisions to the amount of the liability;
and other revenues and expenses recognised in
and
previous reporting periods must be recognised in
c in the financial statements prepared for the net profit or loss in the reporting period in which
first financial year that ends subsequent to the adjustment occurs.
the acquisition, a description of key features
of the restructuring program.
Abstract 10: Accounting for
Abstract 9: Accounting for Acquisitions – Gold Mining
Acquisitions – Recognition of Companies
Acquired Tax Losses
Application and Operative Date

Application and Operative Date This consensus applies to all reporting entities for
all acquisitions of gold mining companies
This consensus applies to all reporting entities in occurring on or after 15 October 1996.
respect of benefits relating tax losses acquired in
the acquisition of an entity which are initially
recognised on or after 6 June 1996. Consensus Reached
1 In the acquisition of a gold mining company,
Consensus Reached assets acquired may include :
a mineral reserves ;
1 The benefits of tax losses acquired in an
acquisition must be recognised as an asset at the b mineral resources and exploration areas
date of acquisition in accordance with resulting from exploration and evaluation
accounting standards AASB 1015 and AAS 21 activities of the acquired entity ; and
“Accounting for the Acquisition of Assets” where c unexplored and unevaluated acreage.
the recognition criteria specified in accounting When an entity acquires a gold mining company,
standards AASB 1020 and AAS 3 “Accounting it must recognise all identifiable assets and
for Income Tax (Tax-effect Accounting)” are liabilities acquired, including identifiable
satisfied. exploration assets, at their cost of acquisition
2 Where the benefits of tax losses acquired in an determined in accordance with the requirements
acquisition were not recognised as assets at the of accounting standards AASB 1015 and AAS 21
date of acquisition but are subsequently “Accounting for the Acquisition of Assets”.
recognised, the amount of goodwill or discount 2 Where, in the acquisition of a gold mining
on acquisition must be adjusted by an amount company, a difference arises between the cost of
representing the fair value, as at the date of acquisition and the amount of the identifiable
acquisition, of the benefits of the tax losses net assets acquired, that difference must be
recognised. accounted for in accordance with accounting
3 Where, in accordance with paragraph 2, standards AASB 1013 and AAS 18 “Accounting
purchased goodwill is adjusted as a result of the for Goodwill”.
recognition of the benefits of tax losses, the 3 Exploration assets recognised at acquisition must
cumulative effect of revisions to the amount of be carried forward provided rights to tenure of
amortisation of goodwill must be recognised in the area of interest are current and at least one of
net profit or loss in the reporting period in the following conditions is met:
which the adjustment occurs.
a the carrying amount is expected to be
recouped through successful development
and exploitation of the area of interest, or
alternatively, by its sale; and

97
 b exploration and evaluation activities in the 4 A liability and expense must be recognised in
area of interest have not at balance date the reporting period in which a present
reached a stage which permits a reasonable obligation to repay a contribution arises.
assessment of the existence or otherwise of 5 On initial application of this consensus, the
economically recoverable reserves, and active amount of any liability or deferred revenue
and significant operations in, or in relation to, recognised in the statement of financial position
the area of interest are continuing. as a result of accounting for a contribution as a
4 Exploration assets recognised at acquisition and liability or deferred revenue (ie. not as revenue)
carried forward in respect of an area of interest must be adjusted against retained profits or
subsequently abandoned, must be written off in accumulated losses as at the beginning of the
the reporting period in which the decision to reporting period to which this consensus is first
abandon is made. applied.
5 Exploration and evaluation expenditures
incurred subsequent to acquisition in respect of
Abstract 12: Accounting for the
an exploration asset acquired, must be accounted
for in accordance with the requirements of Costs of Modifying Computer
accounting standards AASB 1022 or AAS 7 Software for the Year 2000
“Accounting for the Extractive Industries”.

Application and Operative Date

Abstract 11: Accounting for This consensus applies to all reporting entities in
Contributions of, or respect of Year 2000 computer software
Contributions for the Acquisition modification costs from 11 March 1997.

of, Non-Current Assets

Consensus Reached
Application and Operative Date 1 Costs relating to the modification of internal-use
computer software for Year 2000 compatibility
This consensus applies to all reporting entities not must be recognised as an expense in the period
subject to those Accounting Standards which in which they are incurred.
include requirements for accounting for
2 On initial application of this consensus, any Year
contributions of non-current assets, or
2000 computer software modification costs
contributions to assist in the acquisition of non-
previously accounted for otherwise than in
current assets, in respect of reporting periods
accordance with this consensus, must be
ending on or after 30 June 1997.
recognised in net profit or loss in the first period
to which this consensus applies.
Consensus Reached
1 For the purposes of this consensus, Abstract 13: The Presentation of
contributions mean non-reciprocal transfers to
the entity.
the Financial Report of Entities
2 A contribution of non-current assets, or a Whose Securities are “Stapled“
contribution to assist in the acquisition of non-
current assets, must be recognised as an asset Application and Operative Date
and revenue when the entity gains control of the
This Consensus must be applied for reporting
contribution.
periods ending on or after 23 March 2000. When
3 A contribution of non-current assets, or a operative, this Abstract supersedes Abstract 13 “The
contribution to assist in the acquisition of non-
Presentation of the Financial Report of Entities
current assets, must be recognised at its fair
Whose Securities are ‘Stapled’ ”, as issued in May
value, being the fair value of the contributed
1997.
assets as at the date on which the entity gains
control of such assets.

98
Consensus Reached b applicable Accounting Standards and UIG
Consensus Views.
Scope 5 The general purpose financial report which
combines the separate financial reports of the
1 For the purposes of this Consensus, a stapled entities or economic entities whose securities are
security is a security created when an equity stapled must disclose:
security of an entity is combined with an equity
security of another entity and: a that the equity securities of two or more
entities have been stapled;
a is listed on a stock exchange as defined in the
b the identity of the entities whose securities
Corporations Act 2001;
have been stapled; and
b is traded as if the combined securities are a
c a description of any other major features of
single security; and
the stapling arrangements, including any
c neither equity security is transferable circumstances in which they can be
separately from the security with which it is terminated.
combined.
2 This Consensus is not applicable to a stapled Separate Financial Reports
security when:
6 Where a separate general purpose financial
a an equity security of an entity is stapled to the
report or consolidated financial report of any of
equity security of another entity in an
the legal or economic entities whose securities
acquisition as defined in Accounting
are stapled is also prepared, that report must
Standards AASB 1015 “Accounting for the
disclose:
Acquisition of Assets” and AAS 21
“Accounting for the Acquisition of Assets a that an equity security of the entity has been
(including Business Entities)”; or stapled to an equity security of another entity;

b an equity security of a parent entity is stapled b the identity of the other entity or entities; and
to an equity security of one or more of its c a description of any other major features of
subsidiaries. the stapling arrangements, including any
3 A reporting entity is created when the equity circumstances in which they can be
securities of two or more legal entities are issued terminated.
as a stapled security as defined in paragraph 4
(below). Concise Combined Financial Reports
7 Unless excluded from this Consensus by
Combined Financial Reports paragraph 2 (above), where the reporting entity
4 Unless excluded from this Consensus by identified in paragraph 3 (above) prepares a
paragraph 5 (below), the reporting entity concise combined financial report, that report
identified in paragraph 3 (above) must prepare a must:
general purpose financial report which combines a be prepared in accordance with the
the separate financial reports of the entities, or requirements of Accounting Standard AASB
economic entities, whose securities are stapled 1039 “Concise Financial Reports”; and
in accordance with the requirements of: b include the disclosures required by
a Accounting Standards AASB 1024 paragraphs 5 and 6 (above).
“Consolidated Accounts” and AAS 24
“Consolidated Financial Reports” in respect of
common reporting dates, appropriateness and
consistency of accounting policies and
elimination of inter-entity transactions and
balances; and

99
Abstract 14: Directors’ 2 If a foreign currency hedge of an anticipated
purchase or sale of goods or services is
Remuneration terminated early because the anticipated
transaction is no longer expected to occur, the
Application and Operative Date deferred gains and losses that arose on the
foreign currency hedge prior to its termination
This consensus applies to all reporting entities
must be recognised in net profit or loss as at the
required to comply with the requirements of
date of termination.
Accounting Standard AASB 1017/AAS 22 “Related
Party Disclosure” for periods ending on or after 30
June 1997. Abstract 16: Accounting for Share
Buy-Backs
Consensus Reached
This consensus applies to all share buy-backs
The cost to the entity or related party of all items announced on or after 1 July 1998, however it deals
that comprise directors’ remuneration, as defined principally with the buy-back of shares in a par
by AASB 1017/AAS 22, must be included in the value regime. The Company Law Review Act 1998
determination of directors’ remuneration. The abolished the concept of par value, therefore this
abstract includes, as an attachment, a checklist of consensus has no application and a new consensus
items to included or excluded from directors’ has been issued which provides guidance on the
remuneration. accounting for share buy-backs under a no par
value regime, refer to Abstract 22.

Abstract 15: Early Termination of

Foreign Currency Hedges Abstract 17: Developer and
Customer Contributions in Price
Application and Operative Date Regulated Industries
This Consensus applies to all reporting entities for
reporting periods ending on or after 22 October Application and Operative Date
1997 in respect of early terminations of foreign
This consensus applies to government trading
currency hedges that occur before 2 November
enterprises and private sector utility entities for
2000. This Abstract supersedes Abstract 15 “Early
reporting periods commencing on or after 1 May
Termination of Foreign Currency Hedges”, as
1998.
issued in November 1997. Early terminations that
occur on or after 2 November 2000 are subject to
Abstract 33 “Hedges of Anticipated Purchases and Consensus Reached
Sales”. 1 A developer or customer contribution is a
contribution of non-current assets, or a
Consensus Reached contribution to assist in financing the
acquisition or construction of such assets, which:
1 If a foreign currency hedge of an anticipated
a is made to extend or modify a service delivery
purchase or sale of goods or services is
network; and
terminated early and the anticipated transaction
is still expected to occur, the deferred gains and b must be made by a developer or customer to
losses that arose on the foreign currency hedge a government trading enterprise or a private
prior to its termination must continue to be sector utility entity to secure access to services
deferred and then included in the measurement which are subject to price regulation; and
of the purchase or sale when it takes place. c is not included in the asset base used by the
price-regulator for determination of the
regulated tariff.

100
2 A developer or customer contribution of non- Abstract 19: The Superannuation
current assets must be recognised by the
recipient as revenue and an asset when the Contributions Surcharge
recipient gains control of the contribution. The
amount of the revenue and asset recognised Application and Operative Date
must be the fair value of the contributed assets
This consensus applies to superannuation plans for
as at the date on which the recipient gains
reporting periods ending on or after 30 June 1998.
control of the contribution.
3 A developer or customer cash contribution must
be recognised as revenue by the recipient when Consensus Reached
the network is extended or modified consistent 1 The obligation in respect of the superannuation
with the terms of the contribution. contributions surcharge gives rise to a liability
4 The total amount of developer and customer and an expense of a superannuation plan.
contributions recognised as revenue during the 2 A superannuation plan must recognise a liability
reporting period must be disclosed. for the superannuation contributions surcharge
when, and only when, it is probable that it will
be required to make a future sacrifice of
Abstract 18: Early Termination of economic benefits and the amount of the liability
Gold Hedges can be measured reliably.
3 The general purpose financial report must
Application and Operative Date disclose:
This Consensus applies to all reporting entities in a the accounting policy adopted for the
respect of hedges of anticipated sales of gold which recognition of the liability for the
are terminated on or after 1 May 1998 and before 2 superannuation contributions surcharge;
November 2000. This Abstract supersedes Abstract b the amount of the superannuation
18 “Early Termination of Gold Hedges”, as issued contributions surcharge recognised as an
in May 1998. Early terminations that occur on or expense during the reporting period;
after 2 November 2000 are subject to Abstract 33 c the amount of the liability for the
“Hedges of Anticipated Purchases and Sales”. superannuation contributions surcharge
recognised as at the reporting date; and
Consensus Reached d whether any unrecognised liability for the
superannuation contributions surcharge
1 If a hedge of an anticipated sale of gold is exists as at the reporting date, stating the
terminated early and the anticipated transaction reasons for not recognising the liability.
is still expected to occur, the gains or losses that
arise on the termination of the hedge transaction
must be deferred and then included in the Abstract 20: Equity Accounting –
measurement of the sale when it takes place. Eliminating Unrealised Profits
2 If a hedge of an anticipated sale of gold is
and Losses on Transactions with
terminated early because the anticipated
transaction is no longer expected to occur, the Associates
gains or losses that arise on the termination of
the hedge must be recognised in net profit or Application and Operative Date
loss as at the date of termination.
This consensus applies to all reporting entities in
respect of reporting periods ending on or after 30
June 1999.

101
Consensus Reached Abstract 22: Accounting for the
1 Subject to point 3, where possible, unrealised Buy-Back of no Par Value Shares
profits and unrealised losses resulting from
“upstream” and “downstream” transactions
Application and Operative Date
between an associate and:
a the investor and its controlled entities (the This consensus applies to the buy-back of no par
economic entity); value shares included in equity from 17 September
1998.
b another associate of the investor;
must be eliminated to the extent of the investor’s
ownership interest in the associate determined Consensus Reached
in accordance with requirements of AASB 1016 Where shares included in the equity of an entity
and AAS 14. are bought back, the equity of the entity must be
2 Adjustments to eliminate the investor’s share of directly reduced by the cost of acquisition of the
unrealised profits and losses on transactions shares bought back which comprises the purchase
with an associate must be made on a net basis to consideration plus costs incidental to the
the “Investment in Associates” and “Share of acquisition.
Profit and Loss of Associates”, or similar
accounts. Where an entity undertakes a share buy-back, a
description of the nature and terms of the share
3 Unrealised losses must not be eliminated to the
buy-back and any other information material to an
extent that the transaction provides evidence of
understanding of the transaction must be disclosed
an impairment of the asset transferred.
in the financial year in which the buy-back occurs.

Abstract 21: Consistency –

Different Cost Formulas for Abstract 23: Transaction Costs
Inventories Arising on the Issue or Intended
Issue of Equity Instruments
Application and Operative Date
Application and Operative Date
This consensus applies to reporting periods ending
on or after 30 June 1999. This Consensus applies to transaction costs
incurred in respect of equity instruments issued, or
an intended issue of equity instruments where no
Consensus Reached
equity instruments were issued, on or after 11 May
The same cost formula must be adopted for all 2000. When operative, this Abstract supersedes
inventories having similar nature and use to the Abstract 23 “Transaction Costs Arising on the Issue
reporting entity. For inventories with different of Equity Instruments”, as issued in November
nature or use, different cost formulas may be 1998.
justified. A difference in geographical location of
inventories (and in the respective tax rules), by
itself, is not sufficient to justify the use of different
cost formulas.

102
Consensus Reached Abstract 25: Redesignation of
1 Transaction costs arising on the issue of equity Hedges
instruments must be recognised by the issuer of
those equity instruments directly in equity as a
Application and Operative Date
reduction of the proceeds of the equity
instruments to which the costs relate. However, This Consensus applies to all reporting entities in
the amount of the transaction costs deducted respect of hedge redesignations that occur on or
directly from equity must not exceed the after 18 March 1999. This Abstract supersedes
proceeds of the equity instruments issued. Abstract 25 “Redesignation of Hedges”, as issued in
Transaction costs in excess of the proceeds of the April 1999.
equity instruments issued, or where no proceeds
are raised, must be recognised as an expense.
Consensus Reached
2 For the purposes of this Consensus, transaction
costs arising on the issue of equity instruments
are the costs that are incurred directly in Hedge Redesignations from March 1999 to
connection with the issue of those equity November 2000
instruments and which would not have been 1 Paragraphs 2 and 3 (below) apply in respect of
incurred had those equity instruments not been redesignations of foreign currency hedges of an
issued. anticipated purchase or sale of goods or services,
3 The following must be disclosed in respect of and redesignations of hedges of an anticipated
transaction costs recognised during the sale of gold, that occur on or after 18 March
reporting period in accordance with paragraph 1 1999 and before 2 November 2000.
(above): 2 If a hedge is redesignated as a hedge of another
a the amount recognised directly in equity; and exposure and the original anticipated transaction
b the amount recognised as an expense. is still expected to occur, the gains and losses
that arise on the hedge prior to its redesignation
must be deferred and then included in the
Abstract 24: Equity Accounting – measurement of the original anticipated
Carrying Amount of an purchase or sale when it takes place.
3 If a hedge is redesignated as a hedge of another
Investment in an Associate
exposure and the original anticipated transaction
is no longer expected to occur, the gains and
Application and Operative Date losses that arise on the hedge prior to its
This consensus applies to all reporting entities in redesignation must be recognised in net profit or
respect of reporting periods ending on or after 30 loss as at the date of the redesignation.
June 1999.
Hedge Redesignations from November 2000
Consensus Reached 4 Paragraphs 5 and 6 (below) apply in respect of
redesignations of hedges of an anticipated
For the purpose of determining the carrying purchase or sale of goods or services, including
amount of an investment in an associate in commodities, that occur on or after 2 November
accordance with AASB 1016 and AAS 14 2000.
“Accounting for Investments in Associates” the
5 If a hedge is redesignated as a hedge of another
carrying amount of an investment in an associate
exposure and the original anticipated transaction
must only include ordinary shares and other
is still expected to occur as designated, the gains
financial instruments which satisfy the and losses that arise on the hedge prior to its
characteristics of an ownership interest as defined redesignation must be deferred and then
in AASB 1016 and AAS 14. included in the measurement of the original
anticipated purchase or sale when it takes place.

103
6 If a hedge is redesignated as a hedge of another c hedging means action taken with the objective
exposure and the original anticipated transaction of avoiding or minimising possible adverse
is no longer expected to occur as designated, the financial effects of movements in exchange
gains and losses that arise on the hedge prior to rates or commodity prices.
its redesignation must be recognised in net 2 A sold option by itself will not qualify for
profit or loss as at the date of the redesignation. designation as a hedge. Further, except where
paragraphs 3 or 4 apply, an arrangement which
involves a sold option will not qualify for
Abstract 26: Accounting for designation as a hedge.
Major Cyclical Maintenance 3 An arrangement which involves a sold option will
qualify for designation as a hedge when, and only
Application and Operative Date when, the combination of the arrangement and
the hedged item provides at least as much
This Consensus applies to all reporting entities for
potential for gain as exposure to loss over the
reporting periods ending on or after 30 June 1999.
entire range of possible outcomes. Such an
arrangement can only be effective as a hedge to
Consensus Reached the extent that the principal amount of the sold
option(s) is not in excess of the principal amount
1 For the purposes of this Abstract provisions for
of the bought option(s). Any excess of the
future maintenance are provisions for the
principal amount of the sold option(s) over the
anticipated future costs to be incurred under
bought option(s) will not qualify for designation
major cyclical maintenance programs.
as a hedge.
2 Provisions for future maintenance must not be
4 An arrangement which involves a sold option will
recognised as a liability, or as accumulated
qualify for designation as a hedge when:
depreciation or as a reduction in the carrying
amount of an asset. a the arrangement involves a combination of
sold and bought options with equivalent terms
and conditions, including the same exercise
Abstract 27: Designation as prices, maturity dates and number of units of
Hedges – Sold (Written) Options currency or commodity; or
b the arrangement involves a combination of
Application and Operative Date sold and bought options with different
exercise prices, and:
This Consensus applies to all reporting entities for i the principal amounts of the sold and
reporting periods ending on or after 31 December bought options are the same;
1999.
ii the sold and bought options remain
effective to their maturity dates and the
Consensus Reached maturity dates of the sold options are no
later than the maturity dates of the bought
1 For the purposes of this Consensus:
options; and
a a sold option is a right, sold by the entity, to
iii no net premium is received or receivable by
purchase from the entity (or to sell to the
the entity in respect of the hedging
entity) a specified amount of foreign currency
transactions.
or a commodity at an agreed price (the
exercise price) at, or before, an agreed date;
b a bought option is a right, purchased by the
entity, to sell to another entity (or to buy from
another entity) a specified amount of foreign
currency or a commodity at an agreed price
(the exercise price) at, or before, an agreed
date; and

104
Abstract 28: Consolidation – d in substance, the entity retains the majority of
the residual or ownership risks related to the
Special Purpose Entities SPE or its assets in order to obtain benefits
from its activities.
Application and Operative Date 4 Predetermination of the ongoing activities of an
This Consensus applies to all reporting entities for SPE by an enterprise (the sponsor or other party
reporting periods beginning on or after 24 June with a beneficial interest) does not represent
1999. impaired control as referred to in AASB 1024,
paragraph (vii), and AAS 24, paragraph 11.

Consensus Reached
Abstract 29: Early Termination of
1 An SPE must be consolidated when the
substance of the relationship between an entity Interest Rate Swaps
and an SPE indicates that the SPE is controlled
by that entity. Application and Operative Date
2 In the context of an SPE, control may arise This Consensus applies to all reporting entities for
through the predetermination of the activities of
reporting periods ending on or after 2 November
the SPE (operating on “autopilot”) or otherwise.
2000. When operative, this Abstract supersedes
Accounting Standards AASB 1024 “Consolidated
Abstract 29 “Early Termination of Interest Rate
Accounts”, paragraph (xvi), and AAS 24
Swaps”, as issued in December 1999.
“Consolidated Financial Reports”, paragraph 22,
indicate several circumstances which result in
control even in cases where an entity owns one Consensus Reached
half or less of the voting power of another entity.
1 This Consensus applies to interest rate swaps:
Similarly, control may exist even in cases where
an entity owns little or none of the SPE’s equity. a entered into by an entity to reduce its
The application of the control concept requires, exposure to financial risks underlying the
in each case, judgement in the context of all interest receipts or payments associated with
relevant factors. recognised assets or liabilities; and

3 In addition to the situations described in AASB b expected, at inception of the swap and
1024, paragraph (xvi), and AAS 24, paragraph subsequently, to be effective in reducing that
22, the following circumstances, for example, exposure.
would normally indicate a relationship in which 2 When an interest rate swap is terminated early
an entity controls an SPE and consequently must and the hedged anticipated interest transactions
consolidate the SPE (additional guidance is are still expected to occur as designated, the
provided in the Appendix to this Abstract): gains and losses that arise on the swap upon its
a in substance, the activities of the SPE are
early termination must continue to be deferred
being conducted on behalf of the entity
and included on a systematic basis in the
according to its specific business needs so
measurement of those anticipated interest
that the entity obtains benefits from the SPE’s
transactions when they occur.
operation; 3 When an interest rate swap is terminated early
b in substance, the entity has the decision- and the hedged anticipated interest transactions
making powers to obtain the majority of the are no longer expected to occur as designated,
benefits of the activities of the SPE or, by the gains and losses that arise on the swap upon
setting up an “autopilot” mechanism, the its early termination must be recognised in net
entity has delegated these decision-making profit or loss as at the date of the termination.
powers;
c in substance, the entity has rights to obtain
the majority of the benefits of the SPE and
therefore may be exposed to risks incident to
the activities of the SPE; or

105
Abstract 30: Depreciation of Abstract 31: Accounting for the
Long-Lived Physical Assets, Goods and Services Tax (GST)
Including Infrastructure Assets:
Application and Operative Date
Condition-Based Depreciation
and other Related Methods This Consensus applies to all reporting entities for
reporting periods ending on or after 16 December
1999.
Application and Operative Date
This Consensus applies to all reporting entities for Consensus Reached
reporting periods ending on or after 16 December
1999. 1 Revenues, expenses and assets must be
recognised net of the amount of goods and
services tax (GST) except where paragraphs 2
Consensus Reached and 3 apply.
Condition-based depreciation (CBD) and other 2 The amount of GST incurred by the purchaser
methods of depreciation of long-lived physical that is not recoverable from the taxation
assets, including infrastructure assets, that include authority must be recognised as part of the cost
any of the following characteristics do not comply of acquisition of an asset or as part of an item of
with Accounting Standards AASB 1021 and AAS 4 expense.
“Depreciation”, and must be discontinued: 3 Receivables and payables must be stated with the
amount of GST included.
a the depreciation expense is not determined by
reference to the depreciable amount of the asset; 4 The net amount of GST recoverable from, or
payable to, the taxation authority must be
b the depreciation expense is determined without
included as part of receivables or payables in the
consideration of technical obsolescence,
statement of financial position.
potential changes in consumer demand and
related factors which can influence the 5 Cash flows must be included in the statement of
consumption or loss of future economic benefits cash flows on a gross basis in accordance with
during the reporting period; AASB 1026 an AAS 28 “Statement of Cash
Flows”.
c expenditure on maintenance and on
enhancement of future economic benefits are 6 The GST component of cash flows arising from
not separately identified where reliable measures investing and financing activities which is
of these amounts can be determined and are not recoverable from, or payable to, the taxation
recognised as an expense of the reporting period authority must be classified as operating cash
in which the expenditure was incurred in the flows.
case of maintenance expenditure or as an asset 7 Costs incurred to update existing systems or to
in respect of asset enhancement expenditure; design, develop and implement new systems to
d the asset is presumed to be in a steady state and deal with GST must be recognised as an asset
a “renewals accounting” approach is adopted when, and only when, they result in an
whereby all expenditure on the asset is enhancement of future economic benefits.
recognised as an expense in the period in which
it is incurred without consideration of whether
that expenditure enhances the future economic
benefits of the asset beyond that originally
assessed; and
e the major components of complex assets are not
separately identified and are not accounted for as
separate assets where this is necessary to reliably
determine the depreciation expense of the
reporting period.

106
Abstract 32: Designation as Abstract 33: Hedges of
Hedges – Rollover Strategies Anticipated Purchases and Sales

Application and Operative Date Application and Operative Date

This Consensus applies to all reporting entities for This Consensus applies to all reporting entities for
reporting periods ending on or after 2 November hedges of anticipated purchases or sales of goods
2000. When operative, this Abstract supersedes or services entered into on or after 23 March 2000.
Abstract 32 “Designation as Hedges – Rollover
This Consensus also applies to all reporting
Strategies”, as issued in January 2000.
entities for hedges of anticipated purchases or sales
of goods or services already in existence at 23
Consensus Reached March 2000. These hedges must, on or before 30
1 For the purposes of this Consensus, a rollover June 2000, be designated as hedges and comply
strategy is a strategy that specifies the with the hedge accounting criteria set out in
replacement of maturing short-term transactions paragraph 2 (below) in relation to the remaining
with successive new short-term transactions as a term of the hedge, in order to continue to apply
means of hedging an underlying longer-term hedge accounting on and from 30 June 2000. In
exposure to financial risks arising from these circumstances, the deferred gains and losses
anticipated purchases or sales of goods or must be accounted for in accordance with
services, including commodities. paragraph 3 (below).
2 Transactions entered into under rollover
If the hedge accounting criteria are not satisfied on
strategies must be accounted for as hedges of
or before 30 June 2000 for hedges of anticipated
the underlying exposure when, and only when,
purchases or sales of goods or services already in
the following criteria are satisfied:
existence at 23 March 2000, the deferred gains and
a at the inception of the strategy and losses on those hedges must be recognised in net
subsequently, it is expected that the strategy profit or loss no later than 30 June 2000.
will be effective in reducing exposure to the
risks intended to be hedged; and
Consensus Reached
b the strategy is designated prospectively as a
hedge of the underlying exposure. 1 This Consensus applies to hedges of anticipated
3 Gains and losses that arise prior to and upon the purchases or sales of goods or services,
maturity of transactions entered into under including commodities.
rollover strategies that are accounted for as 2 Transactions entered into to hedge anticipated
hedges must be deferred and included in the purchases or sales must be accounted for as
measurement of the hedged anticipated hedges of the anticipated purchases or sales
purchase or sale if the purchase or sale when, and only when, the following criteria are
transaction is still expected to occur as satisfied:
designated. If the forecasted transaction is no a at the inception of the hedge and during the
longer expected to occur as designated, the gains term of the hedging instrument, it is expected
and losses must be recognised immediately in that the hedge will be effective in reducing
net profit or loss. exposure to the risks intended to be hedged;
b the hedging relationship is designated
prospectively, specifically identifying the
hedging instrument as well as the hedged
anticipated purchases or sales – the
characteristics of the hedged purchases or
sales must be designated with sufficient
specificity so that when a purchase or sale
occurs it is clear whether that transaction is
or is not a hedged purchase or sale; and

107
 c it is probable that the anticipated purchases b the goodwill or discount on acquisition,
or sales will occur as designated. measured in accordance with paragraph 5(a),
3 The gains and losses that arise on an instrument must be accounted for in accordance with the
accounted for as a hedge must be deferred and requirements of Accounting Standards AASB
then included in the measurement of the hedged 1013 and AAS 18 “Accounting for Goodwill”
anticipated purchases or sales when they occur. (June 1996); and
If, subsequent to the inception of the hedge, it c any adjustments to the carrying amount of
becomes probable that some or all of the hedged goodwill or discount since acquisition which
anticipated purchases or sales will not occur as would otherwise be recognised in net profit
designated, hedge accounting must be or loss/result must be made against retained
discontinued in relation to those purchases or profits (surplus) or accumulated losses
sales when that assessment is made, and the (deficiencies) as at the beginning of the
deferred gains and losses relating to the reporting period to which the Standards are
purchases or sales that are no longer expected to first applied.
occur as designated must be recognised
immediately in net profit or loss.
Abstract 35: Disclosure of
Contingent Liabilities
Abstract 34: Acquisitions and
Goodwill – First-Time Application Application and Operative Date
of Accounting Standards This Consensus applies to all entities which are
required to prepare financial reports in accordance
Application and Operative Date with Chapter 2M of the Corporations Act 2001 for
This Consensus applies to reporting entities when reporting periods ending on or after 3 August
Accounting Standard AASB 1015 or AAS 21 2000.
“Acquisitions of Assets” (November 1999) is first
applied. Consensus Reached
1 The following information must be disclosed for
Consensus Reached each individual and each category of contingent
liability:
1 A reporting entity applying Australian
accounting standards for the first time must a a brief description of its nature; and
apply the purchase method of accounting to all b wherever possible, the maximum amount
acquisitions of entities or operations, where that may become payable, which has not been
practicable, except for reconstructions within an recognised as a liability.
economic entity as referred to in Accounting 2 Contingent liabilities include the following:
Standard AAS 21 “Acquisitions of Assets”
(November 1999). a liabilities of the entity which have not been
recognised because:
2 Where the purchase method of accounting is
i of significant uncertainty as to whether a
first applied under Australian accounting
sacrifice of future economic benefits will be
standards to the acquisition of an entity or an
required (for example, a guarantee provided
operation:
to a financier for a loan taken out by
a the amount of goodwill or discount on the another entity, where default on the loan is
acquisition must be measured, where uncertain as at the reporting date); or
practicable, in accordance with the
requirements of Accounting Standards AASB
1015 and AAS 21 “Acquisitions of Assets”
(November 1999);

108
 ii the amount of the liability cannot be 2 Where a venturer has eliminated unrealised
measured reliably (for example, a claim for profits and losses arising on the contribution of
damages against the entity, where the entity non-monetary assets on the establishment of a
is defending the claim even though joint venture entity, the amount of the profits
professional advice indicates the defence is and losses that have been eliminated must be
unlikely to succeed, and the amount of the recognised by the venturer as they are realised by
claim cannot be measured reliably as at the the joint venture entity (as the contributed assets
reporting date due to the unique nature of are consumed or sold) or, if not already realised
the claim); and by the joint venture entity, when the venturer
b items that are not recognised as liabilities disposes of its investment in the joint venture
because of significant uncertainty as to entity.
whether an obligation presently exists (for
example, obligations which may arise from
Abstract 37: Accounting for Web
certain tax deductions which were claimed in
previous financial years and which are now Site Costs
under review by the Australian Taxation
Office. The entity would not recognise the tax Application and Operative Date
effect of the amount of deductions under
review as a liability where it believes those This Consensus applies to all reporting entities for
deductions were correctly claimed and reporting periods ending on or after 5 December
intends to dispute any deductions disallowed, 2000.
because of the uncertainty surrounding the
existence of a present obligation to pay the Consensus Reached
relevant amount of tax).
1 The following web site costs must be recognised
as expenses in the period in which they are
Abstract 36: Non-Monetary incurred:
Contributions Establishing a a costs incurred during the planning stage that
are attributable to determining the feasibility
Joint Venture Entity
of and assessing alternative approaches to
building a web site; and
Application and Operative Date
b costs incurred after a web site is first put into
This Consensus applies to all reporting entities for use or held ready for use (that is, during the
reporting periods ending on or after 2 November operation stage) that are attributable to
2000. maintaining the originally assessed standard
of performance of the web site or to
determining the feasibility of and assessing
Consensus Reached
alternative approaches to extending the
1 Unrealised profits and losses arising on a originally assessed standard of performance
venturer’s contribution of non-monetary assets of the web site.
on the establishment of a joint venture entity 2 Web site costs, other than those identified in
must, under the equity method of accounting, be paragraph 1 (above), must be recognised as
eliminated to the extent of the venturer’s expenses in the period in which they are
ownership interest in the joint venture entity, incurred, except that they must be recognised as
determined in accordance with the requirements an asset when, and only when:
of Accounting Standards AASB 1016 and AAS
a the entity controls future economic benefits
14 “Accounting for Investments in Associates”.
as a result of the costs incurred;
However, unrealised losses must not be
eliminated to the extent that the transaction b it is probable that those future economic
provides evidence of an impairment of the non- benefits will eventuate; and
monetary assets. c the costs can be measured reliably.

109
3 Web site costs recognised as an asset in 3 Regardless of the other features or conditions of
accordance with paragraph 2 (above) must be a transfer, the transfer is a contribution by
amortised from the time when the web site is owners where its equity nature is evidenced by
first put into use or held ready for use in any of the following:
accordance with Accounting Standards AASB a the issuance, in relation to the transfer, of
1021 and AAS 4 “Depreciation”. equity instruments which can be sold,
transferred or redeemed;
Abstract 38: Contributions by b a formal agreement, in relation to the
transfer, establishing a financial interest in
Owners made to Wholly-Owned the net assets of the transferee which can be
Public Sector Entities sold, transferred or redeemed; or
c formal designation of the transfer (or a class
Application and Operative Date of such transfers) by the transferor or a
parent entity of the transferor as forming part
This Consensus applies to reporting entities that
of the transferee’s capital, either before the
are: transfer occurs or at the time of the transfer.
a wholly-owned public sector entities, in relation 4 The classification of a transfer to a wholly-owned
to transfers from other entities within the same public sector entity from the government or
economic entity; and another entity controlled by the same
b transferors in relation to these transfers; where government must be determined by reference to
the transfers occur on or after 5 December the rights of the government in respect of the
2000. transfer held directly by the government or
indirectly through any of its controlled entities.
Accordingly, for a transfer to a public sector
Consensus Reached
entity to satisfy part (b) of the definition of
contributions by owners in Accounting
Scope Standards AASB 1004 and AAS 15 “Revenue”,
1 This Consensus applies to transfers to wholly- a right to sell, transfer or redeem the financial
owned public sector entities of assets, or assets interest in the net assets of the transferee must
and liabilities, other than transfers made as be held directly or indirectly by the government.
consideration for the provision by the transferee 5 Where the original transferor is another entity
of assets or services (including the provision of controlled directly or indirectly by the controlling
debt finance) at fair value to the transferor. government of the transferee, a transfer to a
wholly-owned public sector entity must be
Contributions by Owners accounted for by the transferee as a transfer
from that government or a government-
2 A transfer to a wholly-owned public sector entity controlled parent entity of the transferee. Where
must be recognised by the transferee as a the controlling government of the transferee is
contribution by owners when and only when it the original transferor, a transfer to a wholly-
satisfies the definition of “contributions by owned public sector entity must be accounted
owners“ in Accounting Standards AASB 1004 for by the transferee as a transfer from the
and AAS 15 “Revenue”. The criteria set out in immediate transferor (which would be the
paragraphs 3 and 4 (below) must be applied in controlling government if there was no
determining whether a transfer satisfies the interposed parent entity).
definition of contributions by owners.

110
Consistent Classification of Contributions by Abstract 39: Effect of Proposed Tax
Owners
Consolidation Legislation on
6 If a transfer to a wholly-owned public sector
Deferred Tax Balances
entity is classified by the transferee as a
contribution by owners, and the transferor is the
transferee’s controlling government or another Application and Operative Date
entity controlled directly or indirectly by that This consensus applies to all reporting entities for
government, that transferor must classify the reporting periods ending on or after 13 August 2002.
transfer as:
a a distribution to owners, if the transferor
Consensus Reached
makes the transfer to all or part of its
ownership group; or
When to take Proposed Legislation into Account
b the acquisition of an ownership interest in
the transferee, if the transferor makes the 1 A tax consolidation Bill, to the extent that it is
transfer to an investee. relevant to the entity, must be taken into account
in the recognition and measurement of deferred
Redesignation of Transfers tax assets and liabilities when and only when the
Bill has been enacted or substantively enacted prior
7 A transfer designated as a contribution by
to or on the reporting date.
owners must not be redesignated as revenue.
Similarly, a transfer designated as revenue must 2 Substantive enactment of a tax consolidation Bill
not be redesignated as a contribution by owners. must be taken to have occurred once the Bill has
Consistent Classification of Distributions to been tabled in the Parliament and there is majority
Owners as Redemptions of Ownership Interests. support for the passage of the Bill through both
Houses of Parliament. However, where the
8 A transfer classified by the transferor as a
commencement of the Bill is linked to the
distribution to owners must be classified by the
enactment or commencement of another Bill,
immediate transferee as a redemption of part or
the first Bill must not be taken to be enacted or
all of its ownership interest in the transferor
substantively enacted until the second Bill has
when and only when its equity nature is
been enacted or substantively enacted.
evidenced by any of the following:
a the cancellation, in relation to the transfer, of How to take Proposed Tax Consolidation
equity instruments which can be sold,
Requirements into Account
transferred or redeemed;
b amendment of a formal agreement, in 3 Where the elective tax consolidation requirements
relation to the transfer, to reduce the are relevant to an entity and prior to any
transferee’s financial interest in the net assets implementation of the tax consolidation system by
of the transferor which can be sold, the entity, an enacted or substantively enacted tax
transferred or redeemed; or consolidation Bill must be taken into account by
the entity in the recognition and measurement of
c formal designation of the transfer (or a class
deferred tax assets and liabilities in accordance
of such transfers) as a redemption of an
with Accounting Standards AASB 1020 and
ownership interest in the transferor, made by
AAS 3 ‘Accounting for Income Tax (Tax-effect
the government or a government-controlled
Accounting)’ or AASB 1020 and AAS 3 ‘Income
parent entity of the transferee, either before
Taxes’ as follows:
the transfer occurs or at the time of the
transfer. a the carrying amounts of deferred tax assets
and liabilities must be increased or decreased,
as appropriate, to the amounts supported
by the tax law (as amended by the tax
consolidation Bill) and, in the case of a
subsidiary, the consideration expected to be
received from or paid to another entity in
relation to the deferred tax balances;

111
 b the relevant recognition criteria for deferred Abstract 41: Fair Value of Equity
tax assets and liabilities set out in those
Standards, as applicable, must be satisfied, Instruments Issued as Purchase
with the exception that for subsidiaries the Consideration
realisation of deferred tax assets and the
settlement of deferred tax liabilities may be Application and Operative Date
through arrangements with another entity
rather than through income tax This consensus applies to all reporting entities for
assessments for the subsidiary; and acquisitions announced on or after 6 September
c deferred tax assets and liabilities arising in 2001.
the entity must be recognised, if
appropriate, only by that entity (and the Consensus Reached
economic entity that includes that entity).
1 When determining the fair value as at the
acquisition date of equity instruments issued as
Abstract 40: Non-Reciprocal purchase consideration:
Transfers Within an Economic a the fair value of equity instruments must be
estimated by reference to the best available
Entity for Monetary or no
market evidence of the price at which the
Consideration equity instruments could be exchanged
between knowledgeable, willing parties in an
Application and Operative Date arm-length transaction; and
b the fair value of equity instruments that are
This consensus applies to all reporting entities for
traded in an active and liquid market is
reporting periods ending on or after 26 July 2001.
normally their market price as at the
This consensus applies to the accounting by an acquisition date. However, in some instances,
acquirer for an acquisition in which: the notional price at which they could be
placed in the market is a better indicator of
a control of an asset, group of assets or net assets fair value.
is transferred from one entity in an economic
2 When equity instruments are issued as purchase
entity to another entity in the same economic
consideration and either:
entity
a a market price does not exist for those equity
b purchase consideration is wholly monetary, or
instruments; or
nil; and
b a market price does exist as at the acquisition
c the transfer is a non-reciprocal transfer or a
date, but that price has not been used as the
transfer with both reciprocal and non-reciprocal
fair value of the equity instruments;
components.
the entity must disclose the method and
significant assumptions applied in determining
Consensus Reached
their fair value.
1 A non-reciprocal transfer or a transfer with Where a market price exists but has not been
reciprocal and non-reciprocal components must used as the fair value, the entity must disclose
be recognised at the fair value of the transfer as the aggregate difference between the market
at the acquisition date. price and the fair value of the equity
2 The fair value of the transfer less any purchase instruments, and the reasons why the market
consideration must be recognised as: price is not the fair value of the equity
a a contribution by owners when it satisfies the instruments.
definition of “contribution by owners” in
AASB 1004/AAS 15 “Revenue”; and
b revenue, in any other case.

112
Abstract 42: Subscriber Consensus Reached
Acquisition Costs in the 1 Financial instruments with no maturity or
redemption date and with any of the following
Telecommunication Industry features are not converting financial instruments
as defined in Accounting Standard AASB 1033
Application and Operative Date and AAS 33 “Presentation and Disclosure of
Financial Instruments”:
This consensus applies to all reporting entities for
reporting periods ending on or after 18 October a holders have the option to require the issuer
2001. to exchange the financial instrument for
ordinary shares of the issuer;
b holders have the option to require the issuer
Consensus Reached
to redeem or exchange the financial
1 Subscriber acquisition costs are costs incurred in instrument, and the issuer then has the
obtaining and recording telecommunications option to redeem the instrument for cash or
service contracts with subscribers. Direct exchange the instrument for ordinary shares
subscriber acquisition costs are those subscriber of the issuer; or
acquisition costs that are directly attributable to c holders have the option to offer to sell the
establishing specific subscriber contracts and financial instrument to an entity that is not
would not have been incurred had those an agent of the issuer, and:
contracts not been entered into.
i the potential third-party purchaser is not
2 Direct subscriber acquisition costs be recognised obligated to buy the instrument from the
as expenses as incurred, except that they must be holder; and
recognised as an asset when, and only when:
ii holders have the option to require the
a the entity controls future economic benefits issuer to exchange for ordinary shares of
as a result of the costs incurred; the issuer any instrument not sold through
b it is probable that those future economic this resale facility.
benefits will eventuate; and 2 An issuer of a financial instrument identified
c the costs can be measured reliably. above must classify the financial instrument, or
3 Subscriber acquisition costs recognised as an its component parts, as a liability or equity in
asset in accordance with this consensus must be accordance with the definition of a financial
amortised from the date of initial recognition liability and an equity instrument set out in
over the period during which the future Accounting Standards AASB 1033 and AAS 33
economic benefits are expected to be obtained in “Presentation and Disclosure of Financial
accordance with Accounting Standards AASB Instruments”.
1021 and AAS 4 “Depreciation”.
4 Subscriber acquisition costs other than those Abstract 44: Acquisition of
dealt with above must be expensed as incurred.
In-Process Research and
Development
Abstract 43: Classification of
Financial Instruments with Application Date and Operative Date
Conversion Options This consensus applies to all reporting entities in
respect of in-process research and development
Application Date and Operative Date (IPR&D) acquired in the acquisition of an entity or
operation which is initially recognised in reporting
This consensus applies to all reporting entities for
periods ending on or after 12 February 2002.
reporting periods ending on or after 18 October
2001.

113
Consensus Reached b the effect of the loss of control and the initial
application of the equity method of
1 For the purposes of Abstract 44, IPR&D
accounting must be recognised as follows:
comprises acquired intellectual property and
other identifiable intangible assets that can be i the carrying amount of the investment
used only in research and development activities. must be adjusted, as at the date of the
change in status, to that amount,
2 IPR&D must be recognised as a research and
determined in accordance with Accounting
development asset as at the date of acquisition in
Standards AASB 1016 and AAS 14
accordance with AASB 1015/AAS 21 “Acquisition
“Accounting for Investments in Associates”,
of Assets” when and only when the asset
which would have been the carrying
recognition criterion specified in AASB
amount had it been an investment in an
1011/AAS 13 “Accounting for Research and
associate since the acquisition date;
Development Costs” is satisfied.
ii the retained profits (surplus) or
3 Where not separately recognised as a research accumulated losses (deficiency) and
and development asset as at the date of reserves of the investee previously
acquisition in accordance with the above, IPR&D recognised in the consolidated financial
must be included in the determination of the statements must be recognised as a direct
amount of goodwill (or goodwill on acquisition) credit to equity or a direct debit to equity, as
recognised. To the extent that the cost of appropriate, as at the beginning of the
acquisition exceeds the fair value of the net reporting period; and
identifiable assets acquired but the difference
iii the net effect of the change in status of
does not constitute goodwill in accordance with
the investment must be recognised as a
AASB 1013/AAS 8 “Accounting for Goodwill”
revenue or an expense, as appropriate,
such difference must be recognised as an
as at the date of the change in status.
expense in the statement of financial
performance.
Abstract 46: Initial Foreign
Abstract 45: Subsidiary becomes Currency Translation for
a Joint Venture Entity or an Redomiciled Entities
Associate This Consensus applies to all reporting entities that
redomicile during a reporting period ending on or
This Consensus applies to all reporting entities for
after 19 March 2002 and apply Accounting
reporting periods ending on or after 19 March
Standard AASB 1012 or AAS 20 “Foreign Currency
2002 where subsidiaries issue equity instruments.
Translation” for the first time.

Consensus Reached
Consensus Reached
1 A change in the status of an investment from a
1 For the purposes of this Consensus, the
subsidiary to a joint venture entity or an
reporting period in which the entity changes its
associate must be recognised in the consolidated
place of domicile is referred to as the current
financial statements for an economic entity that
reporting period.
includes the investor entity in the reporting
period in which the change occurs, as follows: 2 Where an entity changes its place of domicile
and changes its reporting currency, the initial
a revenues and expenses of the former
translation to the new reporting currency must
subsidiary from the beginning of the
be carried out as at the beginning of the current
reporting period to the date of the change in
reporting period as follows:
status of the investment must be recognised;
and a where the entity has relevant and reliable
historical financial statements (or the

114
 information required to prepare them) in the Abstract 47: Professional
new reporting currency for an entity or
operation, those statements (or information) Indemnity Claims Liabilities In
are adopted for that entity or operation; Medical Defence Organisations
b where the entity does not have relevant and This Consensus applies to the medical defence
reliable historical financial statements (or the
activities of all reporting entities which are or
information required to prepare them) in the
include medical defence organisations for
new reporting currency for an entity or
reporting periods ending on or after 14 June 2002.
operation, the assets, liabilities and items of
equity as at the beginning of the current
reporting period are translated at the spot rate Consensus Reached
at that time;
1 Subject to paragraph 2 below, liabilities arising
c comparative information for the preceding in respect of outstanding claims must be
reporting period is based on relevant and recognised in relation to events that have
reliable historical financial statements (or the occurred prior to the end of the reporting period
information required to prepare them) in the that are alleged to be covered by medical
new reporting currency or is translated at the indemnity arrangements of the entity, in the
spot rate specified in paragraph (b) above, as following cases:
appropriate; and
a unpaid reported claims;
d to the extent that a balancing amount arises
b incurred but not reported claims arising
in the new reporting currency, it is adjusted
under claims incurred indemnity
against retained profits (surplus) or
arrangements;
accumulated losses (deficiency).
c incurred but not reported claims arising
3 Once the initial translation has been made, the
under extended reporting benefit indemnity
transitional provisions set out in Accounting
arrangements or death, disablement or
Standard AASB 1012 or AAS 20 “Foreign
retirement indemnity arrangements, in
Currency Translation” must be applied as at the
relation to:
beginning of the current reporting period. The
transitional provision in paragraph 9.2 of i members for whom such indemnity
Accounting Standard AASB 1012, as issued in arrangements are in effect as at the end of
November 2000, is not relevant to equity the reporting period; and
translated under this Consensus as set out ii members expected to qualify in the future
above. for such indemnity arrangements through
continued membership, death or
4 Once the transitional provisions in Accounting
disablement; and
Standard AASB 1012 or AAS 20 “Foreign
Currency Translation” have been applied as at d incurred but not reported claims arising
the beginning of the current reporting period, under other claims-made indemnity
the requirements of AASB 1012 or AAS 20 must arrangements which are, in substance,
be applied subsequently by the entity. claims-incurred indemnity arrangements.

2 Liabilities arising in respect of outstanding

claims must be recognised when, and only
when, it is probable that settlement will be
required and they are capable of being measured
reliably.

115
3 The following information must be disclosed in a involve advertising similar to the advertising
relation to the determination of the liability for in the barter transaction;
outstanding claims: b occur frequently;
a the accounting policies and methods adopted, c represent a predominant number of
including the basis of measurement and key transactions and amount when compared to
assumptions applied; and all transactions to provide advertising that is
b Information about the nature and extent of similar to the advertising in the barter
the underlying indemnity arrangements, transaction;
including significant terms and conditions d involve cash and/or another form of
that may affect the amount, timing and consideration (e.g., marketable securities,
certainty of future cash flows. non-monetary assets, and other services) that
has a reliably measurable fair value; and
Abstract 48: Status of Tax e do not involve the same counterparty as in
the barter transaction.
Consolidation Legislation
This Consensus, which was agreed on 2 July 2002,
Abstract 50: Evaluating the
applies to all reporting entities for reporting
periods ending on or after 28 June 2002. Substance of Transactions
Involving The Legal Form of a
Consensus Reached Lease
1 Given the linking of the commencement date of This Consensus applies to all reporting entities for
the New Business Tax System (Consolidation) reporting periods ending on or after 13 August
Bill (No. 1) 2002 to Royal Assent of the New 2002.
Business Tax System (Consolidation, Value
Shifting, Demergers and Other Measures) Bill
2002, the first Bill is not taken to be enacted or Consensus Reached
substantively enacted for financial reporting 1 A series of transactions that involve the legal
purposes until the second Bill has been enacted form of a lease is linked and must be accounted
or substantively enacted. for as one transaction when the overall economic
effect cannot be understood without reference to
the series of transactions as a whole.
Abstract 49: Revenue - Barter
2 The accounting must reflect the substance of the
Transactions Involving arrangement. All aspects and implications of an
Advertising Services arrangement must be evaluated to determine its
substance, with weight given to those aspects
This Consensus applies to all reporting entities for
and implications that have an economic effect.
reporting periods ending on or after 2 July 2002.
3 Accounting Standards AASB 1008 and AAS 17
“Leases” apply when the substance of an
Consensus Reached arrangement includes the conveyance of the
1 Revenue from a barter transaction involving right to use an asset for an agreed period of
advertising cannot be measured reliably at the time. Indicators that individually demonstrate
fair value of advertising services received. that an arrangement may not, in substance,
However, a Seller can reliably measure revenue involve a lease under AASB 1008 and AAS 17
at the fair value of the advertising services it include:
provides in a barter transaction, by reference a an entity retains all the risks and rewards
only to non-barter transactions that: incident to ownership of an underlying asset
and enjoys substantially the same rights to its
use as before the arrangement;

116
 b the primary reason for the arrangement is to c other than the initial cash flows at inception
achieve a particular tax result, and not to of the arrangement, the only cash flows
convey the right to use an asset; and expected under the arrangement are the lease
c an option is included on terms that make its payments that are satisfied solely from funds
exercise almost certain (for example, a put withdrawn from the separate investment
option that is exercisable at a price sufficiently account established with the initial cash
higher than the expected fair value when it flows.
becomes exercisable). 5 Other obligations of an arrangement, including
4 The definitions and guidance in Statement of any guarantees provided and obligations
Accounting Concepts SAC 4 “Definition and incurred upon early termination, must be
Recognition of the Elements of Financial accounted for in accordance with Accounting
Statements” paragraphs 14 to 77 must be applied Standard AASB 1044 “Provisions, Contingent
in determining whether, in substance, a separate Liabilities and Contingent Assets”.
investment account and lease payment 6 The criteria in paragraph 7.1 of Accounting
obligations represent assets and liabilities of the Standards AASB 1004 and AAS 15 “Revenue”
entity. Indicators that collectively demonstrate must be applied to the facts and circumstances
that, in substance, a separate investment account of each arrangement in determining when to
and lease payment obligations do not meet the recognise a fee as revenue that an entity might
definitions of an asset and a liability and must receive. Factors such as whether there is
not be recognised by the entity include: continuing involvement in the form of
a the entity is not able to control the investment significant future performance obligations
account in pursuit of its own objectives and is necessary to earn the fee, whether there are
not obligated to pay the lease payments. This retained risks, the terms of any guarantee
occurs when, for example, a prepaid amount arrangements, and the risk of repayment of the
is placed in a separate investment account to fee, must be considered. Indicators that
protect the Investor and may only be used to individually demonstrate that recognition of the
pay the Investor, the Investor agrees that the entire fee as revenue when received, if received
lease payment obligations are to be paid from at the beginning of the arrangement, is
funds in the investment account, and the inappropriate include:
entity has no ability to withhold payments to a obligations either to perform or to refrain
the Investor from the investment account; from certain significant activities are
b the entity has only a remote risk of conditions of earning the fee received, and
reimbursing the entire amount of any fee therefore execution of a legally binding
received from an Investor and possibly paying arrangement is not the most significant act
some additional amount, or, when a fee has required by the arrangement;
not been received, only a remote risk of b limitations are put on the use of the
paying an amount under other obligations underlying asset that have the practical effect
(for example, a guarantee). Only a remote risk of restricting and significantly changing the
of payment exists when, for example, the entity's ability to use (for example, deplete,
terms of the arrangement require that a sell or pledge as collateral) the asset;
prepaid amount is invested in risk-free assets c the possibility of reimbursing any amount of
that are expected to generate sufficient cash the fee and possibly paying some additional
flows to satisfy the lease payment obligations;
and

117
 amount is not remote. This occurs when, for 9 The disclosures required in accordance with
example: paragraph 8 above of this Consensus must be
i the underlying asset is not a specialised provided individually for each arrangement or in
asset that is required by the entity to aggregate for each class of arrangement. A class
conduct its business, and therefore there is is a grouping of arrangements with underlying
a possibility that the entity may pay an assets of a similar nature (for example, power
amount to terminate the arrangement early; plants).
or
ii the entity is required by the terms of the Abstract 51: Recovery of
arrangement, or has some or total
discretion, to invest a prepaid amount in Unfunded Superannuation of
assets carrying more than an insignificant Universities
amo1unt of risk (for example, currency,
This Consensus applies to all universities that are
interest rate or credit risk). In this
circumstance, the risk of the investment’s
reporting entities for reporting periods ending on
value being insufficient to satisfy the lease or after 10 December 2002.
payment obligations is not remote, and
therefore there is a possibility that the Consensus Reached
entity may be required to pay some
1 Where a university has recognised a liability for
amount.
unfunded superannuation obligations and some
7 The fee must be recognised in the statement of or all of the economic benefits required to settle
financial performance based on its economic the liability are expected to be recovered from
substance and nature. third parties, the recovery must be recognised as
8 All aspects of an arrangement that does not, in an asset when:
substance, involve a lease under AASB 1008 and i the university controls future economic
AAS 17 must be considered in determining the benefits in respect of the recovery,
appropriate disclosures that are necessary to
ii it is probable that the recovery will be
understand the arrangement and the accounting
received and the recovery is probable; and
treatment adopted. An entity must disclose the
following in each period that an arrangement iii the amount of the recovery receivable can be
exists: measured reliably.
a a description of the arrangement including: 2 Existing arrangements with Commonwealth and
State Governments and evidence from past
i the underlying asset and any restrictions on
practice indicates that universities control the
its use;
receivable and recovery is considered probable.
ii the life and other significant terms of the
arrangement;
iii the transactions that are linked together,
including any options; and
b the accounting treatment applied to any fee
received, the amount recognised as revenue
in the period, and the line item of the
statement of financial performance in which
it is included.

118
Abstract 52: Income Tax 3 Where the head entity is in default of its
payment obligations under the tax consolidation
Accounting under the Tax system or such default is probable, a wholly-
Consolidation System owned subsidiary in a tax-consolidated group
must recognise a liability (if any) arising under
This Consensus applies to all reporting entities for
the joint and several liability provisions of the tax
reporting periods ending on or after 10 December
consolidation system.
2002.
4 The following information must be disclosed
separately by a head entity and by a wholly-
Consensus Reached owned subsidiary in a tax-consolidated group:
1 The recognition and measurement of income tax a the relevance of the tax consolidation system
amounts in accordance with AASB 1020/AAS 3 to the entity, including the part of the
“Accounting for Income Tax (Tax-effect reporting period for which it applies to the
Accounting)” or AASB 1020/AAS 3 “Income entity where it is not applicable for the whole
Taxes”, must take into account the effects of the of the reporting period, and the name of the
tax consolidation system upon the entity, subject head entity; and
to any tax sharing agreement, as follows: b information about the nature of any tax
a the head entity in a tax-consolidated group sharing agreement, including significant
must recognise tax balances in respect of its terms and conditions that may affect the
own transactions, events and balances; amount, timing and certainty of future cash
b the head entity must also recognise tax flows.
balances relating to transactions, events and
balances of the wholly-owned subsidiaries in
the tax-consolidated group as if those
transactions, events and balances were its
own;
c a wholly-owned subsidiary in a tax-
consolidated group must not recognise
current and deferred tax amounts in respect
of its own transactions, events and balances;
and
d the economic entity that comprises or
includes a tax-consolidated group must
recognise the tax balances relating to
transactions, events and balances of the
entities in the economic entity.
2 Where the head entity and wholly-owned
subsidiaries in the tax-consolidated group have
entered into a tax sharing agreement, each entity
must recognise the assets, liabilities, expenses
and revenues arising for it (if any) under the
agreement.

119
Part Six – Statements of
Accounting Concepts
Statements of Accounting Concepts (SACs) were There are 19 Tentative Building Blocks of a
prepared by the Public Sector Accounting Conceptual Framework for General Purpose
Standards Board (PSASB) and the Australian Financial Reporting and the statements listed above
Accounting Standards Board (AASB). If further relate to blocks 2 to 6 only.
SACs are issued in the future, it is envisaged that
The SACs were intended to:
they would be issued by either the AASB or jointly
by the Australian Accounting Research Foundation a make reporting requirements more consistent
(AARF) on behalf of the Institute of Chartered and logical;
Accountants in Australia (ICAA) and CPA b create all embracing provisions which are more
Australia. difficult to avoid;
SACs currently on issue are: c make the boards think more closely about the
logic behind specific requirements in Accounting
SAC 1 “Definition of the Reporting Entity”; Standards which are outside the framework;
SAC 2 “Objective of General Purpose Financial d reduce the risk of over-regulation by reducing the
Reporting”; need for specific Accounting Standards to those
SAC 3 “Qualitative Characteristics of Financial cases where application of the concepts
Information”; and statements is not clear-cut;
SAC 4 “Definition and Recognition of the e create better understanding of the financial
Elements of Financial Statements”. reporting requirements; and
The first two statements are closely associated with f make the setting of requirements more
the concept of differential reporting. This concept economical by removing the need to re-debate
is discussed in Part 1 to this guide. The third them from differing viewpoints.
statement requires all general purpose financial
reports to: Enforcement
a include all financial information which satisfies APS 1 was amended in December 1993 to remove
the concepts of relevance, reliability, and which the mandatory status of SACs for members of the
passes the materiality test; and ICAA and the then Australian Society of Certified
b be presented on a timely basis and in a manner Practising Accountants (now known as CPA
which satisfies the concepts of comparability and Australia). However, the statements are still
understandability. authoritative guidance and will act as a reference
source for accounting standard formulation.
Purpose ASRB Release 100 “Nature of Approved
These statements form the first of a total Accounting Standards and Statements of
conceptual framework for financial reporting. The Accounting Concepts and Criteria for the
conceptual framework is a set of interrelated Evaluation of Proposed Approved Accounting
concepts which will define the nature, subject, Standards” is essentially a guideline used by the
purpose and broad content of financial reporting. AASB (then ASRB) in the drafting of Accounting
Standards. However, it does state that it is

120
appropriate for preparers of company financial The recognition criteria rely on:
statements and auditors to make use of the concept
a the probability that future economic benefits will
statements in satisfying their obligations under the
eventuate (eg likelihood of not being able to
Corporations Act 2001 to ensure that financial
recover the full amount of all debts leads to a
statements give a true and fair view.
provision for doubtful debts);
For practical purposes, should a clash between a b reliable measurement (eg a mining company
concept statement and any Accounting Standard discovering evidence of minerals after
arise, the Accounting Standard would prevail. Even insignificant costs of exploration may not be able
so, it is contended that any change to remove such to reliably measure the asset).
a clash would be made to the Accounting Standard The statement gives special consideration to:
rather than the concept statement.
a contracts equally proportionately unperformed;
The key features of SAC 4 are as follows:
b leases and indicates that non-cancellable leases
would normally meet the asset recognition
Definition and Recognition of Assets criteria;
Assets are the future economic benefits controlled c firm commitments – if an obligation for capital
by the entity as a result of past transactions or expenditure cannot be avoided without
other past events. substantial penalty then an asset exists; and
d contingent assets – which would be booked as
An asset shall be recognised when, and only when:
assets if they met the criteria but states that
a it is probable that the future economic benefits otherwise may need to be shown in the notes to
embodied in the asset will eventuate; and the financial statements.
b the asset possesses a cost or other value that can
be measured reliably. Definition and Recognition of Liabilities
The essential characteristics are therefore: Liabilities are the future sacrifices of future
economic benefits that a reporting entity is
a there must be economic benefits (a machine
presently obliged to make to other entities as a
would normally have these unless it has become
result of past transactions or other past events.
obsolete or unusable and has no scrap value);
b the entity must have control over these (public A liability shall be recognised when, and only
highways may provide economic benefits and when:
will be assets of governmental unit, but do not
a it is probable that the future sacrifice of future
quality as assets of other entities); and
economic benefit will be required; and
c the transaction or event giving rise to that
b the amount of the liability can be measured
control must have occurred (this would include
reliably.
accretion and discovery).
The requirements for liabilities fit in nicely with
The absence of the following do not preclude the
those for assets and a similar approach is adopted
existence of an asset:
in analysing the criteria.
a acquisition at a cost;
The statement again gives special consideration to
b tangibility; certain items:
c exchangeability (ie separable from the entity) eg
a contracts equally proportionately unperformed;
goodwill arising from unidentifiable assets such
as market penetration, effective advertising, etc. b leases and indicates that non-cancellable leases
would normally meet the liability criteria;
d legal enforceability (eg a formula or invention
could be protected by secrecy rather than c firm commitments – if an obligation for capital
applying for a patent) expenditure cannot be avoided without
substantial penalty then a liability exists;

121
d contingent liabilities – which would be booked d uninsured future losses – stating that an expense
as liabilities if they met the criteria but states only arises when there is a loss and that any self-
that otherwise may need to be shown in the insurance provision is of the nature of a reserve.
notes to the financial statements;
e unearned revenue – which qualifies as a liability; Definition of Equity
f employee entitlements; and Equity is the residual interest in the assets of the
g preference shares – which, depending on the entity after deduction of its liabilities.
type, may be liabilities – eg redeemable
The discussion section of SAC 4 details the
preference shares with a specified redemption
following as characteristics of equity:
date or redeemable at the option of the holder.
a it ranks after liabilities as a claim to the assets of
Definition and Recognition of Expenses an entity; and

Expenses are consumptions or losses of future b it bears the results of operations and
consequences of other events affecting the entity.
economic benefits in the form of reductions in
assets or increases in liabilities of the entity, other Because equity is the excess of assets over
than those relating to distributions to owners, liabilities, the recognition criteria for assets and
which result in a decrease in equity during the liabilities provide the criteria for recognising equity.
reporting period. Complete accounting for assets and liabilities
occurs only under the accrual basis and so the
An expense shall be recognised when, and only concept of equity is used only when that basis has
when: been adopted.
a it is probable that the consumption or loss of
Characteristics of liabilities that equity does not
future economic benefits or service potential
have are;
resulting in a reduction in assets and/or an
increase in liabilities has occurred; and a liabilities are generally claims for a stated or
b the consumption or loss of future economic determinable sum;
benefits can be measured reliably. b settlement may be required on demand, at a
Again the interpretation of these requirements fits specified or determinable date, or on the
in with those for assets. happening of a specified event.
Particular items discussed in the appendix to SAC
Special consideration is given to:
4 are:
a long-lived assets – even though the rate of
a items which are liabilities:
consumption or loss of economic benefits takes
place over a long period or cannot be identified i dividends declared;
with the recognition of specific revenues or ii cumulative non-participating preference
provision of particular services, few assets have shares;
an infinite life and amortisation over the iii redeemable preference shares with specified
expected life is necessary. Specific mention is redemption date or redeemable at option of
made of intangibles such as patents, trademarks holder;
and mastheads;
iv redeemable preference shares redeemable at
b maintenance, repairs and overhauls – reiterating option of issuer where it is probable the entity
the AAS 4 arguments for the need to recognise will redeem;
an expense over the period future economic v convertible debt where it is probable that the
benefits of the assets are consumed; debt will not be converted to ordinary shares;
c employee entitlements – considered to be vi “perpetual” capital notes; and
expenses; and
vii subordinated loans;

122
b items which are equity:
i ordinary shares;
ii convertible debt where it is probable that the
debt will be converted to ordinary shares;
iii government grants received by public sector
entities;
iv fees paid by members of a club where a
financial interest in the net assets of the club
is established; and
c items which are revenue:
i contributions made by entities other than
owners (eg donations, bequests and grants);
and
ii fees paid by members of a club where no
financial interests in the net assets of the club
are established.

Definition and Recognition of Revenues

Revenues are inflows or other enhancements, or
savings in outflows, of service potential or future
economic benefits in the form of increases in
assets or reductions in liabilities of the entity, other
than those relating to contributions by owners, that
result in an increase in equity during the reporting
period.

Revenue shall be recognised when, and only when:

a it is probable that the inflow or other
enhancement or saving in outflows of service
potential or economic benefits has occurred; and
b the inflow or other enhancement or saving in
outflows of economic benefits or service
potential can be measured reliably.
The definition is linked into the definition and
recognition of assets and liabilities criteria.
Revenue items therefore include forgiveness of
loans, gains on foreign currency transactions, gains
on settlement of liabilities and gains on disposal of
assets.

123
Part Seven – Accounting Exposure
Drafts
The Australian Accounting Standards Board (AASB) release exposure drafts as part of the process of issuing
Accounting Standards and Statements of Accounting Concepts.

Accounting Exposure Drafts

The following table lists accounting exposure drafts currently on issue.

Standard Topic Issued

ED 100 Arrangements for the provision of Public Infrastrucure by Other Entities 12/99
– Disclosure Requirements
ED 103 Investment Property (and Consequential Amendments to 12/01
AASB 1021/AAS 4 and AASB 1041)
ED 106 Director, Executive and Related Party Disclosure 09/02
ED 107 Request for Comment on IASB ED 1 First-time Application of 08/02
International Financial Reporting Standards
ED 108 Request for Comment on IASB ED 2 Share-based Payment 11/02
ED 109 Request for comment on IASB ED 3 "Business Combinations", 12/02
IASB ED of Proposed Amendments to IAS 36 "Impairment of Assets"
& IAS 38 "Intangible Assets" and AASB added material

124
Part Eight – Accounting Guidance
Releases
Accounting Guidance Releases
Accounting Guidance Releases were prepared and issued by the Australian Accounting Standards Board
(AASB) and the Public Sector Accounting Standards Board (PSASB) to provide guidance concerning the
application of Australian Accounting Standards and Statements of Accounting Concepts. The following
Accounting Guidance Releases are currently on issue:

Number Topic Issued

AAG 1 Purpose and Scope of Accounting Guidance Releases and Procedures for Issuance 06/90
AAG 2 Accounting for a Change in the Rate of Company Income Tax 12/85
AAG 4 Accounting for Intra-Group Transfer of Tax Losses 12/85
AAG 8 Accounting for the Capital Gains Tax 09/87
AAG 10 Measurement of Monetary Assets and Liabilities 04/88
AAG 11 Debtor’s Accounting for Debt Restructuring 06/90
AAG 13 Determination of Discount Rates for Measuring Certain Liabilities at Present Value 07/93
AAG 14 Recognition of Contributions to Local Governments 09/93

Accounting Interpretations
In place of Accounting Guidance Releases, Accounting Interpretations were prepared by the AASB and the
PSASB and issued by Australian Accounting Research Foundation (AARF) to provide guidance concerning
the application of Australian Accounting Standards and Statements of Accounting Concepts. The following
Accounting Interpretations are currently on issue:

Number Topic Issued

AI 1 Amortisation of Identifiable Intangible Assets 06/99

It is unclear whether the newly formed AASB will issue Accounting Interpretations in the future.

125
Accounting Bulletins
Accounting Bulletins were issued by the staff of AARF after consultation with the Chairman of the AASB
and/or the Chairman of the PSASB and, where relevant, the Chairman of the Urgent Issues Group (UIG).
The following Accounting Bulletins are currently on issue:

Number Topic Issued

AB 1 Application of AASB 1033 and AAS 33 to Compound 03/98

Financial Instruments Issued on or After 1 January 1998
AB 2 Optional Recognition of Land Under Roads 06/98
AB 3 Accounting for Convertible Debt 07/98

To date, the reconstituted AASB have not issued any Accounting Bulletins and it is unclear whether
Accounting Bulletins will be issued in the future.

126
Part Nine – ASIC Class Orders

ASIC Class Orders

Sections 341 and 111AT of the Corporations Act 2001 provides that the Australian Securities Investments
Commission (ASIC) may, in certain cases, make class orders relieving the company, registered scheme or
disclosing entity, its directors and/or auditors from certain financial reporting and auditing requirements of
the Corporations Act 2001.

The following more important and relevant class orders have been released by the ASIC:

Release Number Date Subject

98/96 10/07/98 Permits foreign controlled companies, registered schemes and disclosing
entities to synchronise their financial year with that of their ultimate foreign
parent entity where the foreign parent is required by law to synchronise the
financial years of subsidiaries provided certain conditions are satisfied.
98/98 10/07/98 Relieves foreign controlled small proprietary companies from the requirement
to prepare a financial report in circumstances where a financial report is not
lodged by the foreign parent entity or intermediate Australian parent entity
provided certain conditions are satisfied.
98/99 10/07/98 Relieves large proprietary companies in which an ownership (but not a
controlling interest) is held by a foreign company or which have an authorised
trustee company as a non-beneficial member from the requirement to lodge a
financial report, directors’ report and auditors’ report with the ASIC provided
certain conditions are satisfied.
98/100 10/07/98 Permits rounding off in the directors’ report and financial report where total
assets exceed $10 million, $1,000 million and $10,000 million.
98/101 10/07/98 Relieves public companies, registered schemes and disclosing entities from the
requirement to send a full or concise financial report to shareholders where the
entity cannot establish the address of a shareholder provided certain
conditions are satisfied.
98/104 10/07/98 Relieves listed entities from the requirement to lodge a copy of their financial
report, directors’ report and auditors’ report for the financial year and half-year
with the ASIC where those reports have already been lodged with the ASX.
Where a concise financial report has been prepared it must be lodged with the
ASX along with the full financial report.
98/105 10/07/98 Relieves authorised trustee corporations and wholly-owned subsidiaries of
authorised trustee corporations from the requirement to recognise liabilities
incurred in the capacity of trustee or representative (and the corresponding
right of indemnity) provided the particulars of the relief are disclosed in the
notes to the financial statements. Where a concise financial report has been
prepared it must be lodged with the ASX along with the full financial report.
98/106 10/07/98 Relieves disclosing entities which are regulated superannuation funds,
approved deposit funds or pooled superannuation trusts from preparing and
lodging annual and half-year financial reports.

127
Release Number Date Subject

98/107 10/07/98 Relieves companies and disclosing entities licensed under the Workers
Compensation Act 1987 (NSW) from the requirement to incorporate in their
financial report (and concise financial report) details of the performance and
state of affairs of the statutory funds required to be maintained under the Act.
98/109 10/07/98 Relieves authorised insurers under the Accident Compensation (Work Cover
Insurance) Act 1993 (Vic) from certain requirements of accounting standards
AASB 1014 and AASB 1023 concerning the disclosure of certain insurance
assets and liabilities.
98/110 10/07/98 Relieves Authorised Deposit-Taking Institutions from the need to disclose
certain loans and transactions with related parties (other than directors).
98/111 10/07/98 Relieves financial institutions from the requirement to classify assets and
liabilities into current and non-current categories in their half-year financial
report provided certain conditions are satisfied.
98/112 10/07/98 Relieves the directors of non-life insurance parent entities from ensuring that
the consolidated financial statements comply with certain provisions of
accounting standards AASB 1016, AASB 1018, AASB 1024, AASB 1029 and AASB
1034, provided certain conditions are satisfied. Relief adopted in relation to the
full financial report must also be reflected in the concise financial report.
A brief note that the class order has been applied must be included in the
concise financial report.
98/1416 29/07/98 Relieves entities from the requirement to disclose comparative information in
relation to an immediately preceding half-year or financial year for which such
entities were not required to prepare a financial report.
98/1417 13/08/98 Relieves large proprietary companies and foreign controlled small proprietary
companies from the audit requirements of the Corporations Act 2001 provided
certain conditions are satisfied.
98/1418 13/08/98 Relieves wholly-owned subsidiaries from the requirement to prepare a financial
report and to have that financial report audited provided certain conditions are
satisfied.
98/2016 30/10/98 Relieves entities from the disclosing entity requirements of Chapter 2M of the
Corporations Act 2001 where the entity ceases to be a disclosing entity before
their deadline and the directors resolve that there are no reasons to believe that
the entity may become a disclosing entity before the end of the next financial
year.
98/2395 24/12/98 Allows companies, registered schemes and disclosing entities to include
information otherwise required to be disclosed in the directors’ report to be
transferred to a document attached to the financial report and directors’ report.
99/90 11/02/99 Relieves companies, registered schemes and disclosing entities from sending full
financial reports or concise reports to members who made an open-ended
standing request in writing under an earlier ASIC class order to be sent neither
full financial statements or a short report.
99/1223 30/08/99 Relieves credit unions, building societies, special service providers and friendly
societies from distributing financial reports to members who do not hold shares,
provided they make the reports available to the members at the company’s office
in the 21 days up to the company’s AGM.
99/1225 30/08/99 Relieves benefit fund friendly societies registered under the Life Insurance Act
1995 from certain financial reporting requirements of Chapter 2M of the
Corporations Act 2001 for periods ending on or before 30 June 2003 on
condition that the requirements of Prudential Rules No 47 under the Life
Insurance Act 1995 are complied with.
01/1594 21/12/01 Relieves registered foreign companies from the requirement to lodge financial
statements with the ASIC provided certain conditions are satisfied.

128
Part Ten – ASIC Practice Notes
ASIC Practice Notes
Practice Notes are issued by the ASIC to provide guidance on the application of certain provisions contained
in the Corporations Act 2001 or to indicate the ASIC’s interpretation of certain matters contained in AASB
accounting standards. The following is a list of relevant ASIC Practice Notes.

Release Number Date Subject

22 15/06/92 Provides guidance to directors’ regarding their statement as to

solvency.
36 05/08/93 Indicates the ASIC’s interpretation of AASB 1020 regarding the
requirement that a future income tax benefit not be recognised as an
asset unless realisation of the benefit is virtually certain.
38 26/09/93 Indicates the ASIC’s view regarding accounting methods used by
research and development syndications in terms of their compatibility
with the Corporations Act 2001 and applicable Accounting Standards.
39 04/11/93 Indicates the ASIC’s attitude to a number of accounting issues
regarding accounting for purchased goodwill and AASB 1013,
including:·
• amortisation method
• amortisation period
• balance date review of unamortised goodwill
• disclosure of the adopted accounting policy
• the application of materiality
54 01/09/94 Indicates the ASIC’s view regarding the application of AASB 1015
regarding accounting for the acquisition of net assets, including:
• the application of s.191
• the recognition of goodwill
61 04/03/96 Details the arrangements that the ASIC has made with the ASX to
provide relief to listed disclosing entities from the requirement to lodge
a copy of their half-year financial report with the ASIC where that half-
year financial report has already been lodged with the ASX.
68 01/11/98 Clarifies some of the accounting-related requirements introduced into
the Corporations Act 2001 by the Company Law Review Act 1998 and
the Managed Investments Act 1998.
71 3/10/2001 Provides the ASIC’s view regarding financial reporting for Australian
entities in dual-listed company arrangements. Issues addressed include:
• acquisition accounting and consolidation
• information reported overseas

129
Part Eleven – ASX Listing Rules
ASX Listing Rules (last updated 1 January 2003)
The following table outlines the disclosures required to be included in the annual financial report of a listed
entity by the ASX Listing Rules:

Source
References Disclosure Requirements

All Listed Entities

4.10 An entity must include the following information in its annual report. The information must be current as
at a specified date, that is no more than 6 weeks before the report is sent to security holders.
4.10.3 A statement disclosing the extent to which the entity has followed the best practice recommendations
set by the ASX Corporate Governance Council during the reporting period. If the entity has not followed
all of the recommendations the entity must identify those recommendations that have not been
followed and give reasons for not following them. If a recommendation had been followed for only part
of the period, the entity must state the period during which it had been followed.
4.10.4 The names of substantial shareholders in the entity, and the number of equity securities to which each
substantial holder and the substantial holder’s associates have a relevant interest, as disclosed in
substantial holding notices given to the entity. If a substantial holding notice discloses that related
bodies corporate have the same relevant interest in the same number of equity securities, the annual
report need only include the name of the holding company.
4.10.5 The number of holders of each class of equity securities.
4.10.6 The voting rights attaching to each class of equity securities.
4.10.7 A distribution schedule of the number of holders in each class of equity securities (in the case of
securities over which CDIs have been issued, including holders of CDIs), in the categories:
• 1 – 1,000
• 1,001 – 5,000
• 5,001 – 10,000
• 10,001 – 100,000
• 100,001 – and over.
4.10.8 The number of holders holding less than a marketable parcel of the entity’s main class of securities (in
the case of securities over which CDI’s have been issued, including holders of CDI’s), based on the market
price at the specified date.
4.10.9 The names of the 20 largest holders of each class of quoted equity securities, the number of equity
securities each holds and the percentage of capital ( in the case of a trust, interests ) each holds.
4.10.10 The name of the entity’s secretary (in the case of a trust, the name of the responsible entity or
management company and its secretary).
4.10.11 The address and telephone number of the entity’s registered office in Australia; and of its principal
administrative office, if the two are different.
4.10.12 The address and telephone number of each office at which a register of securities, register of depositary
receipts or other facilities for registration of transfers is kept.
4.10.13 A list of other stock exchanges on which any of the entity’s securities are quoted.

130
 Source
References Disclosure Requirements

All Listed Entities

4.10.14 The number and class of restricted securities or securities subject to voluntary escrow that are on issue, and
the date that the escrow period ends. In the case of securities subject to voluntary escrow, this rule does
not apply to an annual report for a period ending on or before 31 December 2001.

4.10.16 For each class of unquoted equity securities (except CUFs), the number of equity securities that are on issue
and the number of holders. In addition, if a person holds 20% or more of the equity securities in an
unquoted class, the name of the holder and number of equity securities held, unless the securities were
issued or acquired under an employee incentive scheme.

4.10.17 A review of operations and activities for the reporting period.

4.10.18 Whether there is a current on-market buy-back.
4.10.19 In its first two annual reports after admission, a statement about whether the entity used the cash and
assets in a form readily convertible to cash that it had at the time of admission in a way consistent with
its business objectives. If the use was not consistent, an explanation of how the cash and assets were
used. The statement in the first annual report must be for the time between admission and the end of
the reporting period. The statement in the second annual report must be for the whole of the reporting
period. This rule applies to an entity admitted under rule 1.3.2(b) and an entity required to comply with
listing rule 1.3.2(b) because of the application of listing rule 11.1.3.
4.10.20 If the entity is an investment entity, each of the following:
a A list of all investments held by it and its child entities;
b The total number of transactions in securities during the reporting period, together with the total
brokerage paid or accrued during that period; and
c The total management fees paid or accrued during the reporting period, together with a
summary of any management agreement.

Listed Mining Entities

5.6 The annual report must comply with the requirements of Appendix 5A of the Listing Rules.

Listed Mining Exploration Entities

4.10.15 If the entity is a mining exploration entity, the annual report must include a list of interests in mining
tenements, where the tenements are situated and the percentage interest it holds in each.

131
Part Twelve – International
Financial Reporting Standards
Adoption of International Accounting Although subject to the IASB adhering to their
Standards by 2005 timetable, the AASB intends to issue 35 new or
revised Accounting Standards by 31 March 2004. Due
In July 2002, the Financial Reporting Council
to the inter-relationships that exist within IFRS, the
(FRC) formalised its support for International
AASB has adopted a ‘big-bang’ approach to
Financial Reporting Standards (IFRS, previously
convergence and all these Accounting Standards will
known as International Accounting Standards) to
be applicable from 1 January 2005.
be adopted for financial reporting in Australia by
1 January 2005. The Federal Government has also, It is intended that the new/revised Accounting
under its Corporate Law Economic Reform Standards will converge with IFRS, however as part of
Program with the release of Issues Paper No. 9 the due process, in addition to some specific issues
“Corporate Disclosure – Strengthening the on several IFRSs, the AASB will seek opinions on
Financial Reporting Framework”, reinforced the whether:
FRCs proposal for the adoption of IFRS by 2005.
• converging with the IASB is in the best interests of
The compelling reason for the change to IFRS the Australian economy;
is that a single set of high quality accounting • there are any issues relating to not-for-profit
standards which are accepted in major entities, including not-for-profit public sector
international capital markets will greatly facilitate entities, that may affect the implementation of
cross-border comparisons by investors, reduce the IFRS; and
cost of capital, and assist Australian companies • there are any regulatory or other issues arising in
wishing to raise capital or list overseas. The timing the Australian environment that may affect the
of the introduction of IFRS coincides with the implementation of IFRS.
requirement for European Union listed companies
In order to meet the 2005 deadline, the AASB has
to prepare consolidated financial reports in
indicated it intends to issue in:
accordance with IFRS. Concerns have been raised
that if Australia adopts IFRS later than 2005 it may • April/May 2003 – five exposure drafts
result in Accounting Standards in Australia being • June/July 2003 – four exposure drafts and eight
out of step with Europe. new/revised Accounting Standards
As a result, the AASB has increased the priority • August/September 2003 – fourteen exposure drafts
being placed on harmonisation and convergence. and two new/revised Accounting Standards
The AASB has for some time been developing • October/November 2003 – five new/revised
Accounting Standards with a view to international Accounting Standards
harmonisation, but in March 2003 the AASB • December 2003 – two new/revised Accounting
issued its detailed plans for the process of full Standards
convergence with IFRS. The new plans indicate
• February/March 2004 – eighteen new/revised
that the AASB intends to adopt IFRS as equivalent
Accounting Standards
Accounting Standards, with some possible minor
amendments. These Accounting Standards would These exposure drafts are in addition to the several
apply to all entities complying with Accounting exposure drafts and invitations to comment issued by
Standards in Australia, and therefore convergence the AASB in 2002, which were based on and issued
with IFRS will need to be addressed by all entities. at the same time as their IASB equivalents.
It remains unclear at this stage how the AASB plan The impact of the convergence with IFRS will vary
interacts with the CLERP 9 proposal to amend the from entity to entity, depending on structure,
Corporations Act 2001 to require full compliance operations, transactions and historical accounting
with IFRS. policies. Despite Australia’s previous harmonisation
policy, a number of significant differences remain
between IFRS and Accounting Standards in Australia.

132
There are also a myriad of minor differences that many entities will need to identify and resolve. None of the 33
IFRS currently on issue are 100% compatible with Accounting Standards in Australia. In accordance with the
IASB’s current agenda, a significant majority of these IFRS are also expected to be revised between now and
1 January 2005. In addition, new IFRS are expected on topics including share-based payment, first-time application,
business combinations and insurance. As a result, the exact nature and requirements of Accounting Standards that
Australian entities will apply from 1 January 2005 will not be known until at least March 2004. Australian entities
will therefore need to consider the transition process in the context of concurrent changes.

There are also several Accounting Standards in Australia that do not have an international counterpart, including
those on concise financial reports, general and life insurance, the government sector, and extractive industries. It is
expected that the current Accounting Standards in these areas will be retained to satisfy local requirements, or until
equivalent IASB Standards are developed.

The practical impact of this is that entities will most likely be required to restate prior year comparatives on
implementation of the new and revised Accounting Standards in 2005. Assuming the IASB first-time application
proposals are adopted in their current form, restatement of balances as early as 31 December 2003 may be
required.

Entities should not underestimate the business implications and the amount of work involved. The planning and
approach to convergence with IFRS needs to be considered by all entities now.

International Accounting Standards

International Accounting Standards (IASs) were issued by the International Accounting Standards Committee
(IASC), which was restructured in March 2001 and replaced by the International Accounting Standards Board
(IASB). The IASB has adopted the IASs issued by the IASC and will publish its standards in a series of
pronouncement called International Financial Reporting Standards (IFRSs). At this point, the IASB has not issued
any IFRSs.

Australian Accounting Standards are, as far as possible, compatible with International Accounting Standards and
each contains a statement as to its compatibility.

International Accounting Standards are a source of authoritative guidance where no corresponding Australian
Accounting Standard exists.

Current International Accounting Standards are:

IAS 1 Presentation of Financial Statements
IAS 2 Inventories
IAS 7 Cash Flow Statements
IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies
IAS 10 Events After the Balance Sheet Date
IAS 11 Construction Contracts
IAS 12 Income Taxes
IAS 14 Segment Reporting
IAS 15 Information Reflecting the Effects of Changing Prices
IAS 16 Property, Plant and Equipment
IAS 17 Leases
IAS 18 Revenue
IAS 19 Employee Benefits
IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
IAS 21 The Effects of Changes in Foreign Exchange Rates
IAS 22 Business Combinations
IAS 23 Borrowing Costs
IAS 24 Related Party Disclosures
IAS 25 Accounting for Investments
IAS 26 Accounting and Reporting by Retirement Benefit Plans

133
 IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries
IAS 28 Accounting for Investments in Associates
IAS 29 Financial Reporting in Hyperinflationary Economies
IAS 30 Disclosure in the Financial Statements of Banks and Similar Financial Institutions
IAS 31 Financial Reporting of Interests in Joint Ventures
IAS 32 Financial Instruments: Disclosure and Presentation
IAS 33 Earnings Per Share
IAS 34 Interim Financial Reporting
IAS 35 Discontinuing Operations
IAS 36 Impairment of Assets
IAS 37 Provisions, Contingent Liabilities and Contingent Assets
IAS 38 Intangible Assets
IAS 39 Financial Instruments: Recognition and Measurement
IAS 40 Investment Property
IAS 41 Agriculture

International SIC Interpretations are:

SIC 1 Consistency – Different Cost Formulas for Inventories
SIC 2 Consistency – Capitalisation of Borrowing Costs
SIC 3 Elimination of Unrealised Profits and Losses on Transactions with Associates
SIC 5 Classification of Financial Instruments – Contingent Settlement Provisions
SIC 6 Costs of Modifying Existing Software
SIC 7 Introduction of the Euro
SIC 8 First-time Application of IASs as the Primary Basis of Accounting
SIC 9 Business Combinations – Classification either as Acquisitions or Unitings of Interests
SIC 10 Government Assistance – No Specific Relation to Operating Activities
SIC 11 Foreign Exchange – Capitalisation of Losses Resulting from Severe Currency Devaluations
SIC 12 Consolidation – Special Purpose Entities
SIC 13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers
SIC 14 Property, Plant and Equipment – Compensation for the Impairment or Loss of Items
SIC 15 Operating Leases – Incentives
SIC 16 Share Capital – Reacquired Own Equity Instruments (Treasury Shares)
SIC 17 Equity – Costs of an Equity Transaction
SIC 18 Consistency – Alternative Methods
SIC 19 Reporting Currency – Measurement and Presentation of Financial Statements Under IAS 21 and IAS 29
SIC 20 Equity Accounting Method – Recognition of Losses
SIC 21 Income Taxes – Recovery of Revalued Non-Depreciable Assets
SIC 22 Business Combinations – Subsequent Adjustment of Fair Values and Goodwill Initially Reported
SIC 23 Property Plant and Equipment – Major Inspection or Overhaul Costs
SIC 24 Earnings Per Share – Financial Instruments and Other Contracts that May Be Settled in Shares
SIC 25 Income Tax – Changes in the Tax Status of an Enterprise or its Shareholders
SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease
SIC 28 Business Combinations – “Date of Exchange” and Fair Value of Equity Instruments
SIC 29 Disclosure – Service Concession Arrangements
SIC 30 Reporting Currency – Translation from Measurement Currency to Presentation Currency
SIC 31 Revenue – Barter Transactions Involving Advertising Services
SIC 32 Intangible Assets – Web Site Costs
SIC 33 Consolidation and Equity Method – Potential Voting Rights and Allocation of Ownership Interests

134
IASB Exposure Drafts
The IASB is currnetly working on several projects that are likely to impact applicable standards
for 2005.

The following are the Exposure Drafts currently on issue by the IASB:
• Proposed Improvements to International Accounting Standards and their Impacts on Australian
Standards
• Proposed Improvements to International Accounting Standards IAS 32 ‘Financial Instruments:
Disclosure and Presentation’ and IAS 39 ‘Financial Instruments: Recognition and Measurement’1
• ED 1 First-Time Application of “International Financial Reporting Standards”
• ED 2 Share-based Payment
• ED 3 “Business Combinations” and ED of Proposed Amendments to IAS 36, Impairment of Assets,
and IAS 38 “Intangible Assets”

135
Notes
______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________________________________________________________________________________________________________

136
 Our Signals
Recruit and retain the best Our people are talented, enthusiastic, self-starters, team players
who are bursting with potential. They are people with whom we
have a lifetime association.

Talk straight When we talk, it’s open, regular, honest, constructive two-way
communication between our people and our clients.

Empower and trust We encourage a sense of ownership and pride by giving

responsibility and delegating authority.

Continuously grow and improve We have an environment that respects the individual, rewards
achievements, welcomes change and encourages a lifetime of
learning - with ourselves and our clients.
Aim to be famous We aim to reach for the stars - and beyond. To become thought
leaders, showcasing our clients and our team’s talent and expertise.

Play to win-think globally Winning is our stated objective. It is also our state of mind.

Have fun and celebrate There is never a wrong time to celebrate and have fun –
recognising, appreciating, acknowledging and learning from the
experiences and success shared between our client and Deloitte
teams.
Further Information
For further information please contact your nearest Deloitte Touche Tohmatsu office.

Adelaide Alice Springs Brisbane

Deloitte House 9 Parsons Street Riverside Centre
190 Flinders Street ALICE SPRINGS NT 0871 Level 25 & 26
ADELAIDE SA 5000 Telephone (08) 8950 7000 123 Eagle Street
Telephone (08) 8407 7000 Facsimile (08) 8950 7001 BRISBANE QLD 4001
Facsimile (08) 8407 7001 Telephone (07) 3308 7000
Facsimile (07) 3308 7001

Canberra Darwin Hobart

Level 2 5th Floor Level 9
St George Centre 62 Cavenagh Street ANZ Centre
60 Marcus Clarke Street DARWIN NT 0800 22 Elizabeth Street
CANBERRA ACT 2600 Telephone (08) 8980 3000 HOBART TAS 7000
Telephone (02) 6202 7000 Facsimile (08) 8980 3001 Telephone (03) 6237 7000
Facsimile (02) 6202 7001 Facsimile (03) 6237 7001

Kalgoorlie Katherine Launceston

337B Hannan Street 1st Floor 49-51 Elizabeth Street
KALGOORLIE WA 6430 42 Katherine Terrace LAUNCESTON TAS 7250
Telephone (08) 9021 3633 KATHERINE NT 0850 Telephone (03) 6337 7000
Facsimile (08) 9021 4150 Telephone (08) 8972 1077 Facsimile (03) 6337 7001
Facsimile (08) 8971 0256

Melbourne Parramatta Perth

505 Bourke Street Deloitte Touche Tohmatsu Building Central Park
MELBOURNE VIC 3000 10 Smith Street Level 16
Telephone (03) 9208 7000 PARRAMATTA NSW 2150 152-158 St George Terrace
Facsimile (03) 9208 7001 Telephone (02) 9840 7000 PERTH WA 6000
Facsimile (02) 9840 7001 Telephone (08) 9365 7000
Facsimile (08) 9365 7001

Port Moresby National Office

Level 12 Grosvenor Place
Deloitte Tower 225 George Street
Douglas Street SYDNEY NSW 2000
PORT MORESBY PNG Telephone (02) 9322 7000
Telephone (675) 308 7000 Facsimile (02) 9322 7001
Facsimile (675) 308 7001

or contact our website at www.deloitte.com.au

138
15th EDITION – April 2003

This document is of a general nature only

and is not intended to be relied upon as, nor
to be a substitute for, specific professional
advice. No responsibility for loss occasioned
to any person acting on or refraining from
action as a result of any material in this
publication can be accepted.

The liability of Deloitte Touche Tohmatsu

is limited by, and to the extent of, the
Accountants’ Scheme under the
Professional Standards Act 1994 (NSW).

Syd_04.03_02859

© Copyright – Deloitte Touche Tohmatsu,

Australia 2003