AASB Standard
AASB2011-4
July 2011
Amendments to Australian Accounting Standardsto Remove Individual Key Management Personnel Disclosure Requirements
 
[AASB 124]
 



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CONTENTS
Preface
Accounting Standard
AASB 2011-4AmenDMENTS TO aUSTRALIAN aCCOUNTING sTANDARDS TO REMOVE INDIVIDUAL KEY MANAGEMENT PERSONNEL DISCLOSURE REQUIREMENTS
 
Paragraphs
Objective                                                                                                                       1
Application                                                                                                             2 – 3
Amendments to AASB 124                                                                                4 – 6
 
BASIS FOR CONCLUSIONS                                                                         Page 7
 
Australian Accounting Standard AASB 2011-4Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirementsis set out in paragraphs 1 – 6. All the paragraphs have equal authority.
 
Preface
Standards Amended by AASB 2011-4
This Standard makes amendments to Australian Accounting Standard AASB 124 Related Party Disclosures.
These amendments arise froma decision of the AASB to remove the individual key management personnel (KMP) disclosures from AASB 124 on the basis they:
·              are not part of International Financial Reporting Standards (IFRSs), which include requirements to disclose aggregate (rather than individual) amounts of KMP compensation;
·              are not included in New Zealand accounting standards and, accordingly, their removal is consistent with meeting the 2010 Outcome Proposal of the Australian and New Zealand governments that for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements;
·              are considered by the AASB to be more in the nature of governance disclosures that are better dealt with as part of the Corporations Act 2001;
·              were originally included in AASB 124 when fewer similar disclosure requirements were included in the Corporations Actand, in many respects, relate to similar disclosure requirements currently in that Act and therefore detract from the clarity of the requirements applying in this area; and
·              could be considered (during the transition period for this Amending Standard) for inclusion in the Corporations Actor other legislation to the extent they presently go beyond the requirements in legislation and are consideredappropriate in light of government policy.
 
aCCOUNTING STANDARD AASB 2011-4
The Australian Accounting Standards Board makes Accounting Standard AASB 2011-4Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirementsunder section 334 of the Corporations Act 2001.
 
 
Kevin M. Stevenson

Dated 7July 2011
Chair – AASB

 
 
aCCOUNTING STANDARD AASB 2011-4
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS TO REMOVE INDIVIDUAL
KEY MANAGEMENT PERSONNEL
DISCLOSURE REQUIREMENTS
Objective
1              The objective of this Standard is to make amendments toAASB 124 Related Party Disclosures to remove individual key management personnel disclosure requirements.
Application
2              This Standard applies to each disclosing entity, or group of which a disclosing entity is the parent, that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act.
3              This Standard applies to annual reporting periods beginning on or after 1 July 2013.  Early adoption of this Standard is not permitted.
Amendments to AASB 124
4              Paragraphs Aus1.1, Aus1.4, Aus1.4.1, Aus1.5, Aus1.9 and paragraphs Aus29.1 to Aus29.9.3, including headings associated with paragraphs Aus29.1 to Aus29.9.3, are deleted from AASB 124.
5              Paragraph Aus1.3 is amended to read as follows:
Aus1.3  This Standard does not apply to general purpose financial statements of not-for-profit public sector entities.
6              Paragraph Aus1.8 is amended to read as follows:
Aus1.8  The requirements of this Standard apply to the financial statements where information resulting from their application is material in accordance with AASB 1031 Materiality.
basis for conclusions
Background
BC1         This Basis for Conclusions summarises the AASB’s considerations in deciding that the disclosure requirements regarding individual key management personnel (KMP) should be removed from AASB 124 Related Party Disclosures.  Individual AASB members gave greater weight to some factors than to others.
Additional Australian requirements
BC2         The AASB adopts International Financial Reporting Standards (IFRSs)by incorporating them into Australian Accounting Standards and publicly accountable for-profit entities are required to apply them in preparing their general purpose financial statements.  (Public accountability is defined in AASB 1053 Application of Tiers of Australian Accounting Standards and includes listed and other disclosing entities.)  The AASB includes some disclosure requirements that are in addition to the IFRSs, but aims to keep these to a minimum on the basis that the IFRSs represent best international practice for general purpose financial reporting of publicly accountable for-profit entities.
BC3         Prior to adopting IFRSs in 2005, the AASB had on issue AASB 1046Director and Executive Disclosures by Disclosing Entities, which included disclosure requirements in respect of the compensation, equity holdings and loans of individual KMP.  When IFRSs were adopted, these requirements were largely carried forward for disclosing entities as ‘Aus’ paragraphs in AASB 124, which incorporatesIAS 24 Related Party Disclosures.
BC4         Section 300A of the Corporations Act 2001and Regulation 2M.3.03were amended in 2007 to require disclosing entities that are companies to report individual remuneration information in the directors’ report.[1]  The AASB responded by amending AASB 124 to relieve disclosing entities that are companies from complying with the paragraphs in AASB 124 that have been included in the Corporations Act and Regulation 2M.3.03, following a due process that involved issuingED 162 Proposed Amendments to Key Management Personnel Disclosures by Disclosing Entitiesin April 2008 for public comment.  The resulting amendment avoidedrequiring each disclosing entity that is a company to disclose this information twice – in itsdirectors’ report and in its financial statements.[2]  The existing AASB 124 retains Australian-specific individual KMP disclosure requirements on remuneration in relation to disclosing entities other than companies, and on equity holdings, loans, and other transactions and balances in relation to all disclosing entities.
Constituent views
BC5         A number of constituents who commented on ED 162 encouraged the Board to consider removing all the individual KMP disclosure requirements (Aus paragraphs)from AASB 124.  Accordingly, in ED 200A Proposals to Harmonise Australian and New Zealand Standards in Relation to Entities Applying IFRSs as Adopted in Australia and New Zealand(issued in July 2010) the AASB specifically sought comment on whether the individual KMP disclosure requirements should be retained or removed.  All of those who responded to this question supported their removal.
BC6         The views expressed by constituents on ED 162 and ED 200A were largely based on two factors:
(a)             a view that individual KMP disclosures are a governance matter that would be most appropriately dealt with directly by the Government through the Corporations Act; and
(b)             a desire to remove as much Australian specific text from the AASB’s Standards that incorporate IFRSs so that those Standards replicate as closely as possible the content of the IFRSs as issued by the IASB.
BC7         Constituents have also raised concerns about the potential for confusion because all of the AASB 124 individual KMP disclosures apply to disclosing entities that are not companies, while only a subset of those disclosures apply to disclosing entities that are companies (as explained in paragraph BC4).
New Zealand Convergence
BC8         The AASB and the New Zealand accounting standard setter have been converging their standards over recent years.  A key aim is to meet the Outcome Proposals set by the Australian and New Zealand governments, which include enabling for-profit entities to use a single set of accounting standards and prepare only one set of financial statementsfor both jurisdictions.[3]  The New Zealand accounting standards also incorporate IFRSs and do not contain additional individual KMP disclosure requirements.
BC9         The AASB concluded that it is in the interests of trans-Tasman convergence, and achieving the Outcome Proposals, to remove the individual KMP disclosure requirements from Australian Accounting Standards.
BC10     The AASB noted that the Australian Treasury and New Zealand Ministry of Economic Development are aware that the legislative requirements regarding individual KMP disclosures may need to be changed in order to align them across the two jurisdictions.
Nature of Disclosures
BC11     The AASB 1046 disclosure requirements (noted in paragraph BC3) that were carried forward when Australia adopted IFRSs were, in part, the product of an earlier policy of removing disclosure requirements from corporations legislation and including them in accounting standards.  In the years since adopting IFRSs, there has been more emphasis on including governance-type disclosures directly in legislation.
BC12     More disclosure requirements have been added to Section 300A of the Corporations Act regarding disclosures about individual KMP as well as a requirement for a remuneration report for listed companies since the AASB first made the Standards incorporating IFRSs.
BC13     The AASB concluded that the IAS 24 requirements (included in AASB 124) to disclose amounts of aggregate KMP compensation as well as treating KMP as related parties for the purposes of the other disclosure requirements are sufficient in the context of the role of accounting standards in meeting the objective of general purpose financial reporting.[4]
Timing
BC14     The amendments to AASB 124 to remove the disclosure requirements regarding individual KMP are applicable toannual reporting periods beginning on or after 1 July 2013, and early adoption is not permitted.  Accordingly, relevant disclosing entities will need to comply with the disclosure requirements for at least another two years.
BC15     The AASB concluded that the transition period should be sufficient to allow the relevant government agencies to consider whether there is a need to amend their existing requirements regarding disclosures relating to individual KMP and, if so, the manner in which they should be amended.  In particular, the AASB was mindful of allowing sufficient time to conduct any relevant public consultation in view of other developments that are taking place in connection with governance disclosure requirements.

[1]Corporations Act Regulation 2M.6.04 permitted listed companies to avoid making the same disclosures twice; however, the Corporations Amendment Regulations 2007 (No. 2) removed that regulation.
[2]AASB 2008-4 Amendments to Australian Accounting Standard – Key Management Personnel Disclosures by Disclosing Entities
[3]More information is available from the Trans-Tasman Outcomes Implementation Group website – www.treasury.gov.au/ttoig.
[4]  The objective of financial reporting is currently identified in SAC 2 Objective of General Purpose Financial Reporting and Framework for the Preparation and Presentation of Financial Statements.