Accounting Standard
AASB 2008-5
July 2008
Amendments to Australian Accounting Standards arising from the Annual Improvements Project
[AASB 5, 7, 101, 102, 107, 108, 110, 116, 118, 119, 120, 123, 127, 128, 129, 131, 132, 134, 136, 138, 139, 140, 141, 1023 & 1038]
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© 2008 Commonwealth of Australia
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ISSN 1036-4803
CONTENTS
Preface
Accounting Standard
AASB 2008-5 AmenDMENTS TO aUSTRALIAN aCCOUNTING sTANDARDS aRISING FROM the Annual Improvements Project
Paragraphs
Objective 1
Application 2 – 9
Amendment to AASB 5 10 – 11
Amendment to AASB 7 12 – 13
Amendments to AASB 101 14 – 15
Amendment to AASB 102 16 – 17
Amendments to AASB 107 18 – 20
Amendments to AASB 108 21
Amendment to AASB 110 22
Amendments to AASB 116 23 – 26
Amendments to AASB 118 27
Amendments to AASB 119 28 – 32
Amendments to AASB 120 33 – 37
Amendments to AASB 123 38 – 40
Amendments to AASB 127 41 – 44
Amendments to AASB 128 45 – 47
Amendments to AASB 129 48
Amendments to AASB 131 49 – 51
Amendments to AASB 132 52 – 54
Amendment to AASB 134 55
Amendments to AASB 136 56 – 59
Amendments to AASB 138 60 – 63
Amendments to AASB 139 64 – 67
Amendments to AASB 140 68 – 72
Amendments to AASB 141 73 – 78
Amendments to AASB 1023 79
Amendments to AASB 1038 80
Australian Accounting Standard AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project is set out in paragraphs 1 – 80. All the paragraphs have equal authority.
Preface
Standards Amended by AASB 2008-5
This Standard makes amendments to the following Australian Accounting Standards:
1 AASB 5 Non-current Assets Held for Sale and Discontinued Operations;
2 AASB 7 Financial Instruments: Disclosures;
3 AASB 101 Presentation of Financial Statements;
4 AASB 102 Inventories;
5 AASB 107 Statements of Cash Flows;
6 AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors;
7 AASB 110 Events after the Reporting Period;
8 AASB 116 Property, Plant and Equipment;
9 AASB 118 Revenue;
10 AASB 119 Employee Benefits;
11 AASB 120 Accounting for Government Grants and
Disclosure of Government Assistance;
12 AASB 123 Borrowing Costs;
13 AASB 127 Consolidated and Separate Financial Statements;
14 AASB 128 Investments in Associates;
15 AASB 129 Financial Reporting in Hyperinflationary Economies;
16 AASB 131 Interests in Joint Ventures;
17 AASB 132 Financial Instruments: Presentation;
18 AASB 134 Interim Financial Reporting;
19 AASB 136 Impairment of Assets;
20 AASB 138 Intangible Assets;
21 AASB 139 Financial Instruments: Recognition and
Measurement;
22 AASB 140 Investment Property;
23 AASB 141 Agriculture;
24 AASB 1023 General Insurance Contracts; and
25 AASB 1038 Life Insurance Contracts;
as a consequence of the annual improvements project.
The amendments result from proposals that were included in Exposure Draft ED 159 Proposed Improvements to Australian Accounting Standards issued in October 2007 and follow the issuance of the IASB Standard Improvements to IFRSs in May 2008. The IASB’s annual improvements project provides a vehicle for making non-urgent but necessary amendments to Standards.
Main Features of this Standard
Application Date
This Standard is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009.
The insertion of early adoption conditions in the individual Standards means that the amendments to each of those Standards can be applied separately from the amendments to the other Standards, provided the early adoption conditions in the particular Standard are satisfied.
Main Requirements
The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting. The subjects of the principal amendments to the Standards are set out below:
Australian Accounting Standard
Subject of amendment
AASB 5 Non-current Assets Held for Sale and Discontinued Operations
Point-of-sale costs
AASB 7 Financial Instruments: Disclosures
Presentation of finance costs
AASB 101 Presentation of Financial Statements
Current/non-current classification of derivatives
AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
Status of implementation guidance
AASB 110 Events after the Reporting Period
Dividends declared after the end of the reporting period
AASB 116 Property, Plant and Equipment
Recoverable amount
Sale of assets held for rental
AASB 118 Revenue
Costs of originating a loan
AASB 119 Employee Benefits
Curtailments and negative past service cost
Plan administration costs
Replacement of term ‘fall due’
Guidance on contingent liabilities
AASB 120 Accounting for Government Grants and Disclosure of Government Assistance
Government loans with a below-market rate of interest
Consistency of terminology with other Australian Accounting Standards
AASB 123 Borrowing Costs
Components of borrowing costs
AASB 127 Consolidated and Separate Financial Statements
Measurement of subsidiary held for sale in separate financial statements
AASB 128 Investments in Associates
Required disclosures when investments in associates are accounted for at fair value through profit or loss
Impairment of investment in associate
AASB 131 Interests in Joint Ventures
Required disclosures when interests in jointly controlled entities are accounted for at fair value through profit or loss
AASB 129 Financial Reporting in Hyperinflationary Economies
Description of measurement basis in financial statements
Consistency of terminology with other Australian Accounting Standards
AASB 134 Interim Financial Reporting
Earnings per share disclosures in interim financial reports
AASB 136 Impairment of Assets
Disclosure of estimates used to determine recoverable amount
AASB 138 Intangible Assets
Advertising and promotional activities
Unit of production method of amortisation
AASB 139 Financial Instruments: Recognition and Measurement
Reclassification of derivatives into or out of the classification of “at fair value through profit or loss”
Designating and documenting hedges at the segment level
Applicable effective interest rate on cessation of fair value hedge accounting
AASB 140 Investment Property
Property under construction or development for future use as investment property
Consistency of terminology with AASB 108
Investment property held under lease
AASB 141 Agriculture
Discount rate for fair value calculations
Additional biological transformation
Examples of agricultural produce and products
Point-of-sale costs
AASB 1023 General Insurance Contracts
Investments not classified for sale under AASB 5
AASB 1038 Life Insurance Contracts
Investments not classified for sale under AASB 5
aCCOUNTING STANDARD AASB 2008-5
The Australian Accounting Standards Board makes Accounting Standard AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project under section 334 of the Corporations Act 2001.
D.G. Boymal
Dated 24 July 2008
Chair – AASB
aCCOUNTING STANDARD AASB 2008-5
AMENDMENTS TO AUSTRALIAN ACCOUNTING STANDARDS ARISING FROM the Annual Improvements Project
Objective
1 The objective of this Standard is to make amendments to:
(a) AASB 5 Non-current Assets Held for Sale and Discontinued Operations;
(b) AASB 7 Financial Instruments: Disclosures;
(c) AASB 101 Presentation of Financial Statements;
(d) AASB 102 Inventories;
(e) AASB 107 Statement of Cash Flows;
(f) AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors;
(g) AASB 110 Events after the Reporting Period;
(h) AASB 116 Property, Plant and Equipment;
(i) AASB 118 Revenue;
(j) AASB 119 Employee Benefits;
(k) AASB 120 Accounting for Government Grants and Disclosure of Government Assistance;
(l) AASB 123 Borrowing Costs;
(m) AASB 127 Consolidated and Separate Financial Statements;
(n) AASB 128 Investments in Associates;
(o) AASB 129 Financial Reporting in Hyperinflationary Economies;
(p) AASB 131 Interests in Joint Ventures;
(q) AASB 132 Financial Instruments: Presentation;
(r) AASB 134 Interim Financial Reporting;
(s) AASB 136 Impairment of Assets;
(t) AASB 138 Intangible Assets;
(u) AASB 139 Financial Instruments: Recognition and Measurement;
(v) AASB 140 Investment Property;
(w) AASB 141 Agriculture;
(x) AASB 1023 General Insurance Contracts; and
(y) AASB 1038 Life Insurance Contracts;
as a consequence of the annual improvements project.
Application
2 In respect of AASB 101, AASB 107 and AASB 108, this Standard applies to:
(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act;
(b) general purpose financial statements of each reporting entity; and
(c) financial statements that are, or are held out to be, general purpose financial statements.
3 In respect of AASB 120, this Standard applies to:
(a) each for-profit entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;
(b) general purpose financial statements of each other for-profit reporting entity; and
(c) financial statements of a for-profit entity that are, or are held out to be, general purpose financial statements.
4 In respect of AASB 134, this Standard applies to:
(a) each disclosing entity required to prepare half-year financial reports in accordance with Part 2M.3 of the Corporations Act;
(b) interim financial reports that are general purpose financial statements of each other reporting entity; and
(c) interim financial reports that are, or are held out to be, general purpose financial statements.
5 In respect of AASB 1038, this Standard applies to each entity that is:
(a) a life insurer; or
(b) the parent in a group that includes a life insurer;
when the entity:
(c) is a reporting entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act;
(d) is an other reporting entity and prepares general purpose financial statements; or
(e) prepares financial statements that are, or are held out to be, general purpose financial statements.
6 Subject to paragraphs 2-5, this Standard applies to:
(a) each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act and that is a reporting entity;
(b) general purpose financial statements of each other reporting entity; and
(c) financial statements that are, or are held out to be, general purpose financial statements.
7 This Standard applies to annual reporting periods beginning on or after 1 January 2009.
8 This Standard may be applied to annual reporting periods beginning on or after 1 January 2005 but before 1 January 2009.
9 The insertion of early application conditions in the individual Standards means that the amendments to each of those Standards can be applied separately from the amendments to the other Standards provided the early application conditions in the particular Standard are satisfied.
Amendments to AASB 5
10 Paragraph 5 is amended to read as follows:
5. The measurement provisions of this Standard3 do not apply to the following assets, which are covered by the Australian Accounting Standards listed, either as individual assets or as part of a disposal group:
(a) …
(e) non-current assets that are measured at fair value less costs to sell in accordance with AASB 141 Agriculture; and
(f) …
3Other than paragraphs 18 and 19, which require the assets in question to be measured in accordance with other applicable Australian Accounting Standards.
11 Entities shall apply the amendments to paragraph 5 of AASB 5 when they apply the ‘costs to sell’ amendment to paragraph 5 of AASB 141 set out in paragraph 74 of this Standard.
Amendments to AASB 7
12 Paragraph 3(a) is amended to read as follows:
3 This Standard shall be applied by all entities to all types of financial instruments, except:
(a) those interests in subsidiaries, associates or joint ventures that are accounted for in accordance with AASB 127 Consolidated and Separate Financial Statements, AASB 128 Investments in Associates or AASB 131 Interests in Joint Ventures. However, in some cases, AASB 127, AASB 128 or AASB 131 permits an entity to account for an interest in a subsidiary, associate or joint venture using AASB 139; in those cases, entities shall apply the requirements of this Standard. Entities shall also apply this Standard to all derivatives linked to interests in subsidiaries, associates or joint ventures unless the derivative meets the definition of an equity instrument in AASB 132;
(b) …
13 Paragraph 44D is added:
44D Paragraph 3(a) was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact and apply for that earlier period the amendments to paragraph 1 of AASB 128, paragraph 1 of AASB 131 and paragraph 4 of AASB 132 issued in July 2008. An entity is permitted to apply the amendment prospectively.
Amendments to AASB 101
14 Paragraphs 68 and 71 are amended to read as follows:
68 The operating cycle of an entity is the time between the acquisition of assets for processing and their realisation in cash or cash equivalents. When the entity’s normal operating cycle is not clearly identifiable, it is assumed to be twelve months. Current assets include assets (such as inventories and trade receivables) that are sold, consumed or realised as part of the normal operating cycle even when they are not expected to be realised within twelve months after the reporting period. Current assets also include assets held primarily for the purpose of trading (examples include some financial assets classified as held for trading in accordance with AASB 139) and the current portion of non-current financial assets.
71 Other current liabilities are not settled as part of the normal operating cycle, but are due for settlement within twelve months after the reporting period or held primarily for the purpose of trading. Examples are some financial liabilities classified as held for trading in accordance with AASB 139, bank overdrafts, and the current portion of non-current financial liabilities, dividends payable, income taxes and other non-trade payables. Financial liabilities that provide financing on a long-term basis (ie are not part of the working capital used in the entity’s normal operating cycle) and are not due for settlement within twelve months after the reporting period are non-current liabilities, subject to paragraphs 74 and 75.
15 Paragraph 139C is added:
139C Paragraphs 68 and 71 were amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
Amendments to AASB 102
16 Paragraph 20 is amended to read as follows:
20 In accordance with AASB 141 Agriculture inventories comprising agricultural produce that an entity has harvested from its biological assets are measured on initial recognition at their fair value less costs to sell at the point of harvest. This is the cost of the inventories at that date for application of this Standard.
17 Entities shall apply the amendment to paragraph 20 of AASB 102 when they apply the ‘costs to sell’ amendment to paragraph 5 of AASB 141 set out in paragraph 74 of this Standard.
Amendments to AASB 107
18 Paragraph 14 is amended to read as follows:
14 Cash flows …
…
Some transactions, such as the sale of an item of plant, may give rise to a gain or loss that is included in recognised profit or loss. The cash flows relating to such transactions are cash flows from investing activities. However, cash payments to manufacture or acquire assets held for rental to others and subsequently held for sale as described in paragraph 68A of AASB 116 Property, Plant and Equipment are cash flows from operating activities. The cash receipts from rents and subsequent sales of such assets are also cash flows from operating activities.
19 The heading “Effective Date of IAS 7” above paragraph 53 is changed to “Effective Date”.
20 Paragraph 55 is added:
55 Paragraph 14 was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact and apply paragraph 68A of AASB 116.
Amendments to AASB 108
21 Paragraphs 7, 9 and 11 are amended to read as follows:
7 When an Australian Accounting Standard specifically applies to a transaction, other event or condition, the accounting policy or policies applied to that item shall be determined by applying the Standard.
9 Australian Accounting Standards are accompanied by guidance to assist entities in applying their requirements. All such guidance states whether it is an integral part of Australian Accounting Standards. Guidance that is an integral part of Australian Accounting Standards is mandatory. Guidance that is not an integral part of Australian Accounting Standards does not contain requirements for financial statements.
11 In making the judgement described in paragraph 10, management shall refer to, and consider the applicability of, the following sources in descending order:
(a) the requirements in Australian Accounting Standards dealing with similar and related issues; and
(b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.
Amendment to AASB 110
22 Paragraph 13 is amended to read as follows:
13 If dividends are declared (ie the dividends are appropriately authorised and no longer at the discretion of the entity) after the reporting period but before the financial statements are authorised for issue, the dividends are not recognised as a liability at the end of the reporting period because no obligation exists at that time. Such dividends are disclosed in the notes in accordance with AASB 101 Presentation of Financial Statements.
Amendments to AASB 116
23 Paragraphs 5, 6 and 69 are amended to read as follows:
5 An entity using the cost model for investment property in accordance with AASB 140 Investment Property shall use the cost model in this Standard.
6 The following terms are used in this Standard with the meanings specified:
…
Recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use.
…
69 The disposal of an item of property, plant and equipment may occur in a variety of ways (eg by sale, by entering into a finance lease or by donation). In determining the date of disposal of an item, an entity applies the criteria in AASB 118 for recognising revenue from the sale of goods. AASB 117 applies to disposal by a sale and leaseback.
24 Paragraph 68A is added:
68A However, an entity that, in the course of its ordinary activities, routinely sells items of property, plant and equipment that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in accordance with AASB 118 Revenue. AASB 5 does not apply when assets that are held for sale in the ordinary course of business are transferred to inventories.
25 The heading “Effective Date of IAS 16” above paragraph 81 is changed to “Effective Date”.
26 Paragraphs 81D and 81E are added:
81D Paragraphs 6 and 69 were amended and paragraph 68A was added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact and at the same time apply the related amendments to AASB 107 Statement of Cash Flows.
81E Paragraph 5 was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment prospectively for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted if an entity also applies the amendments to paragraphs 8, 9, 22, 48, 53, 53A, 53B, 54, 57 and 85B of AASB 140 at the same time. If an entity applies the amendment for an earlier period it shall disclosure that fact.
Amendments to AASB 118
27 Paragraph 14(a) of the Appendix accompanying AASB 118 is amended to read as follows and a footnote is added:
14 Financial service fees
The recognition of revenue for financial service fees depends on the purposes for which the fees are assessed and the basis of accounting for any associated financial instrument. The description of fees for financial services may not be indicative of the nature and substance of the services provided. Therefore, it is necessary to distinguish between fees that are an integral part of the effective interest rate of a financial instrument, fees that are earned as services are provided, and fees that are earned on the execution of a significant act.
(a) Fees that are an integral part of the effective interest rate of a financial instrument
Such fees are generally treated as an adjustment to the effective interest rate. However, when the financial instrument is measured at fair value with the change in fair value recognised in profit or loss, the fees are recognised as revenue when the instrument is initially recognised.
(i) Origination fees received by the entity relating to the creation or acquisition of a financial asset other than one that under AASB 139 is classified as a financial asset ‘at fair value through profit or loss’
Such fees may include compensation for activities such as evaluating the borrower’s financial condition, evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instrument, preparing and processing documents and closing the transaction. These fees are an integral part of generating an involvement with the resulting financial instrument and, together with the related transaction costs1 (as defined in AASB 139), are deferred and recognised as an adjustment to the effective interest rate.
(ii) Commitment fees received by the entity to originate a loan when the loan commitment is outside the scope of AASB 139
If it is probable that the entity will enter into a specific lending arrangement and the loan commitment is not within the scope of AASB 139, the commitment fee received is regarded as compensation for an ongoing involvement with the acquisition of a financial instrument and, together with the related transaction costs (as defined in AASB 139), is deferred and recognised as an adjustment to the effective interest rate. If the commitment expires without the entity making the loan, the fee is recognised as revenue on expiry. Loan commitments that are within the scope of AASB 139 are accounted for as derivatives and measured at fair value.
(iii) Origination fees received on issuing financial liabilities measured at amortised cost
These fees are an integral part of generating an involvement with a financial liability. When a financial liability is not classified as ‘at fair value through profit or loss’, the origination fees received are included, with the related transaction costs (as defined in AASB 139) incurred, in the initial carrying amount of the financial liability and recognised as an adjustment to the effective interest rate. An entity distinguishes fees and costs that are an integral part of the effective interest rate for the financial liability from origination fees and transaction costs relating to the right to provide services, such as investment management services.
1In AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project, issued in July 2008, the Board replaced the term ‘direct costs’ with ‘transaction costs’ as defined in paragraph 9 of AASB 139. This amendment removed an inconsistency for costs incurred in originating financial assets and liabilities that should be deferred and recognised as an adjustment to the underlying effective interest rate. ‘Direct costs’, as previously defined, did not require such costs to be incremental.
Amendments to AASB 119
28 Paragraphs 7, 8(b), 32B, 97, 98, 111 are amended to read as follows:
7 The following terms are used in this Standard with the meanings specified.
…
Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) that are not due to be settled within twelve months after the end of the period in which the employees render the related service.
Past service cost is the change in the present value of the defined benefit obligation for employee service in prior periods, resulting in the current period from the introduction of, or changes to, post-employment benefits or other long-term employee benefits. Past service cost may be either positive (when benefits are introduced or changed so that the present value of the defined benefit obligation increases) or negative (when existing benefits are changed so that the present value of the defined benefit obligation decreases).
…
The return on plan assets is interest, dividends and other revenue derived from the plan assets, together with realised and unrealised gains or losses on the plan assets, less any costs of administering the plan (other than those included in the actuarial assumptions used to measure the defined benefit obligation) and less any tax payable by the plan itself.
Short-term employee benefits are employee benefits (other than termination benefits) that are due to be settled within twelve months after the end of the period in which the employees render the related service.
…
8 Short term employee benefits include items such as:
(a) …
(b) short-term compensated absences (such as paid annual leave and paid sick leave) where the compensation for the absences is due to be settled within twelve months after the end of the period in which the employees render the related employee service;
(c) …
32B AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires an entity to disclose information about some contingent liabilities. In the context of a multi-employer plan, a contingent liability may arise from, for example:
(a) …
97 Past service cost arises when an entity introduces a defined benefit plan that attributes benefits to past service or changes the benefits payable for past service under an existing defined benefit plan. Such changes are in return for employee service over the period until the benefits concerned are vested. Therefore, the entity recognises past service cost over that period, regardless of the fact that the cost refers to employee service in previous periods. The entity measures past service cost as the change in the liability resulting from the amendment (see paragraph 64). Negative past service cost arises when an entity changes the benefits attributable to past service so that the present value of the defined benefit obligation decreases.
98 Past service cost excludes:
(a) the effect of differences between actual and previously assumed salary increases on the obligation to pay benefits for service in prior years (there is no past service cost because actuarial assumptions allow for projected salaries);
(b) underestimates and overestimates of discretionary pension increases when an entity has a constructive obligation to grant such increases (there is no past service cost because actuarial assumptions allow for such increases);
(c) estimates of benefit improvements that result from actuarial gains that have been recognised in the financial statements if the entity is obliged, by either the formal terms of a plan (or a constructive obligation that goes beyond those terms) or legislation, to use any surplus in the plan for the benefit of plan participants, even if the benefit increase has not yet been formally awarded (the resulting increase in the obligation is an actuarial loss and not past service cost, see paragraph 85(b));
(d) the increase in vested benefits when, in the absence of new or improved benefits, employees complete vesting requirements (there is no past service cost because the entity recognised the estimated cost of benefits as current service cost as the service was rendered); and
(e) the effect of plan amendments that reduce benefits for future service (a curtailment).
111 A curtailment occurs when an entity either:
(a) is demonstrably committed to make a significant reduction in the number of employees covered by a plan; or
(b) amends the terms of a defined benefit plan so that a significant element of future service by current employees will no longer qualify for benefits, or will qualify only for reduced benefits.
A curtailment may arise from an isolated event, such as the closing of a plant, discontinuance of an operation or termination or suspension of a plan, or a reduction in the extent to which future salary increases are linked to the benefits payable for past service. Curtailments are often linked with a restructuring. When this is the case an entity accounts for a curtailment at the same time as for a related restructuring.
29 Paragraph 111A is added:
111A When a plan amendment reduces benefits, only the effect of the reduction for future service is a curtailment. The effect of any reduction for past service is a negative past service cost.
30 The heading “Effective Date of IAS 19” above paragraph 157 is changed to “Effective Date”.
31 Paragraphs 159D and 160 are added:
159D Paragraphs 7, 8(b), 32B, 97, 98, and 111 were amended and paragraph 111A was added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply the amendments in paragraphs 7, 8(b) and 32B for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact. An entity shall apply the amendments in paragraphs 97, 98, 111 and 111A to changes in benefits that occur on or after 1 January 2009.
160 AASB 108 applies when an entity changes its accounting policies to reflect the changes specified in paragraphs 159-159D. In applying those changes retrospectively, as required by AASB 108, the entity treats those changes as if they had been applied at the same time as the rest of this Standard. The exception is that an entity may disclose the amounts required by paragraph 120A(p) as the amounts are determined for each annual reporting period prospectively from the first annual reporting period presented in the financial statements in which the entity first applies the amendments in paragraph 120A.
32 Paragraph Aus160.1 is deleted and a note added as follows:
Aus160.1 [Deleted by the AASB]
Amendments to AASB 120
33 Paragraph 10A is added:
10A The benefit of a government loan at a below-market rate of interest is treated as a government grant. The loan shall be recognised and measured in accordance with AASB 139 Financial Instruments: Recognition and Measurement. The benefit of the below-market rate of interest shall be measured as the difference between the initial carrying value of the loan determined in accordance with AASB 139 and the proceeds received. The benefit is accounted for in accordance with this Standard. The entity shall consider the conditions and obligations that have been, or must be, met when identifying the costs for which the benefit of the loan is intended to compensate.
34 Paragraph 37 is deleted and a note added as follows:
37 [Deleted by the IASB]
35 The heading “Effective Date of IAS 20” above paragraph 41 is changed to “Effective Date”.
36 Paragraph 43 is added:
43 Paragraph 37 was deleted and paragraph 10A added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments prospectively to government loans received in annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
37 A footnote1 is added to the title of the Standard above paragraph 1, and paragraphs 2, 12-18, 20-22, 26, 27 and 32 are amended to read as follows:
Footnote to title:
1As part of AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008 the Board amended terminology used in this Standard to be consistent with other Australian Accounting Standards as follows:
(a) ‘taxable income’ was amended to ‘taxable profit or tax loss’,
(b) ‘recognised as income/expense’ was amended to ‘recognised in profit or loss’,
(c) ‘credited directly to shareholders’ interests/equity’ was amended to ‘recognised outside profit or loss’, and
(d) ‘revision to an accounting estimate’ was amended to ‘change in accounting estimate’.
2 This Standard does not deal with:
(a) the special problems … similar nature.
(b) government assistance that is provided for an entity in the form of benefits that are available in determining taxable profit or tax loss, or are determined or limited on the basis of income tax liability. Examples of such benefits are income tax holidays, investment tax credits, accelerated depreciation allowances and reduced income tax rates.
(c) government … the entity.
(d) …
12 Government grants shall be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.
13 There are two broad approaches to the accounting for government grants: the capital approach, under which a grant is recognised outside profit or loss, and the income approach, under which a grant is recognised in profit or loss over one or more periods.
14 Those in support of the capital approach argue as follows:
(a) government grants are a financing device and should be dealt with as such in the statement of financial position rather than be recognised in profit or loss to offset the items of expense that they finance. Because no repayment is expected, such grants should be recognised outside profit or loss.
(b) it is inappropriate to recognise government grants in profit or loss, because they are not earned but represent an incentive provided by government without related costs.
15 Arguments in support of the income approach are as follows:
(a) because government grants are receipts from a source other than shareholders, they should not be recognised directly in equity but should be recognised in profit or loss in appropriate periods.
(b) government grants are rarely gratuitous. The entity earns them through compliance with their conditions and meeting the envisaged obligations. They should therefore be recognised in profit or loss over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate.
(c) because income and other taxes are expenses, it is logical to deal also with government grants, which are an extension of fiscal policies, in profit or loss.
16 It is fundamental to the income approach that government grants should be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate. Recognition of government grants in profit or loss on a receipts basis is not in accordance with the accrual accounting assumption (see AASB 101 Presentation of Financial Statements) and would be acceptable only if no basis existed for allocating a grant to periods other than the one in which it was received.
17 In most cases the periods over which an entity recognises the costs or expenses related to a government grant are readily ascertainable. Thus grants in recognition of specific expenses are recognised in profit or loss in the same period as the relevant expenses. Similarly, grants related to depreciable assets are usually recognised in profit or loss over the periods and in the proportions in which depreciation expense on those assets is recognised.
18 Grants related to non-depreciable assets may also require the fulfilment of certain obligations and would then be recognised in profit or loss over the periods that bear the cost of meeting the obligations. As an example, a grant of land may be conditional upon the erection of a building on the site and it may be appropriate to recognise the grant in profit or loss over the life of the building.
20 A government grant that becomes receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognised in profit or loss of the period in which it becomes receivable.
21 In some circumstances, a government grant may be awarded for the purpose of giving immediate financial support to an entity rather than as an incentive to undertake specific expenditures. Such grants may be confined to a particular entity and may not be available to a whole class of beneficiaries. These circumstances may warrant recognising a grant in profit or loss of the period in which the entity qualifies to receive it, with disclosure to ensure that its effect is clearly understood.
22 A government grant may become receivable by an entity as compensation for expenses or losses incurred in a previous period. Such a grant is recognised in profit or loss of the period in which it becomes receivable, with disclosure to ensure that its effect is clearly understood.
26 One method recognises the grant as deferred income that is recognised in profit or loss on a systematic basis over the useful life of the asset.
27 The other method deducts the grant in calculating the carrying amount of the asset. The grant is recognised in profit or loss over the life of a depreciable asset as a reduced depreciation expense.
32 A government grant that becomes repayable shall be accounted for as a change in accounting estimate (see AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors). Repayment of a grant related to income shall be applied first against any unamortised deferred credit recognised in respect of the grant. To the extent that the repayment exceeds any such deferred credit, or when no deferred credit exists, the repayment shall be recognised immediately in profit or loss. Repayment of a grant related to an asset shall be recognised by increasing the carrying amount of the asset or reducing the deferred income balance by the amount repayable. The cumulative additional depreciation that would have been recognised in profit or loss to date in the absence of the grant shall be recognised immediately in profit or loss.
Amendments to AASB 123
38 Paragraph 6 is amended to read as follows:
6 Borrowing costs may include:
(a) interest expense calculated using the effective interest rate method as described in AASB 139 Financial Instruments: Recognition and Measurement;
(b) [deleted by the IASB]
(c) [deleted bty the IASB]
(d) finance charges in respect of finance leases recognised in accordance with AASB 117 Leases; and
(e) exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.
39 The heading “Effective Date of IAS 23” above paragraph 31 is changed to “Effective Date”.
40 Paragraph 29A is added:
29A Paragraph 6 is amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact.
Amendments to AASB 127
41 Paragraph 37 of AASB 127 (July 2004, as amended) is amended to read as follows:
37 When an entity prepares separate financial statements, it shall account for investments in subsidiaries, jointly controlled entities and associates either:
(a) at cost, or
(b) in accordance with AASB 139.
The entity shall apply the same accounting for each category of investments. Investments accounted for at cost shall be accounted for in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations when they are classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with AASB 5. The measurement of investments accounted for in accordance with AASB 139 is not changed in such circumstances.
42 An entity shall apply the amendment to paragraph 37 of AASB 127 (July 2004, as amended) for annual reporting periods beginning on or after 1 January 2009, prospectively from the date at which it first applied AASB 5. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact.
43 Paragraph 38 of AASB 127 (as issued in March 2008) is amended to read as follows:
38 When an entity prepares separate financial statements, it shall account for investments in subsidiaries, jointly controlled entities and associates either:
(a) at cost, or
(b) in accordance with AASB 139.
The entity shall apply the same accounting for each category of investments. Investments accounted for at cost shall be accounted for in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations when they are classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with AASB 5. The measurement of investments accounted for in accordance with AASB 139 is not changed in such circumstances.
44 Paragraph 45A is added to AASB 127 (as issued in March 2008):
45A Paragraph 38 was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009, prospectively from the date at which it first applied AASB 5. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact.
Amendments to AASB 128
45 Paragraphs 1 and 33 are amended to read as follows:
1 This Standard shall be applied in accounting for investments in associates. However, it does not apply to investments in associates held by:
(a) venture capital organisations, or
(b) mutual funds, unit trusts and similar entities including investment-linked insurance funds
that upon initial recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with AASB 139 Financial Instruments: Recognition and Measurement. Such investments shall be measured at fair value in accordance with AASB 139, with changes in fair value recognised in profit or loss in the period of the change. An entity holding such an investment shall make the disclosures required by paragraph 37(f).
33 Because goodwill that forms part of the carrying amount of an investment in an associate is not separately recognised, it is not tested for impairment separately by applying the requirements for impairment testing goodwill in AASB 136 Impairment of Assets. Instead, the entire carrying amount of the investment is tested for impairment in accordance with AASB 136 as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever application of the requirements in AASB 139 indicates that the investment may be impaired. An impairment loss recognised in those circumstances is not allocated to any asset, including goodwill, that forms part of the carrying amount of the investment in the associate. Accordingly, any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. In determining the value in use of the investment, an entity estimates:
…
46 The heading “Effective Date of IAS 28” above paragraph 41 is changed to “Effective Date and Transition”.
47 Paragraph 41C is added:
41C Paragraphs 1 and 33 were amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact and apply for that earlier period the amendments to paragraph 3 of AASB 7 Financial Instruments: Disclosures, paragraph 1 of AASB 131 and paragraph 4 of AASB 132 Financial Instruments: Presentation issued in July 2008. An entity is permitted to apply the amendments prospectively.
Amendments to AASB 129
48 A footnote is added to the title of the Standard above paragraph 1 and paragraphs 6, 8, 14, 15, 19, 20, 28 and 34 are amended to read as follows:
Footnote to title:
1As part of AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008, the Board changed the terms used in AASB 129 to be consistent with other Australian Accounting Standards as follows: (a) ‘market value’ was amended to ‘fair value’, and (b) ‘results of operations’ and ‘net income’ were amended to ‘profit or loss’.
6 Entities that prepare financial statements on the historical cost basis of accounting do so without regard either to changes in the general level of prices or to increases in specific prices of recognised assets or liabilities. The exceptions to this are those assets and liabilities that the entity is required, or chooses, to measure at fair value. For example, property, plant and equipment may be revalued to fair value and biological assets are generally required to be measured at fair value. Some entities, however, present financial statements that are based on a current cost approach that reflects the effects of changes in the specific prices of assets held.
8 The financial statements of an entity whose functional currency is the currency of a hyperinflationary economy, whether they are based on a historical cost approach or a current cost approach, shall be stated in terms of the measuring unit current at the end of the reporting period. The corresponding figures for the previous period required by AASB 101 Presentation of Financial Statements (as revised in 2007) and any information in respect of earlier periods shall also be stated in terms of the measuring unit current at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, paragraphs 42(b) and 43 of AASB 121 The Effects of Changes in Foreign Exchange Rates apply.
14 All other assets and liabilities are non-monetary. Some non-monetary items are carried at amounts current at the end of the reporting period, such as net realisable value and fair value, so they are not restated. All other non-monetary assets and liabilities are restated.
15 Most non-monetary items are carried at cost or cost less depreciation; hence they are expressed at amounts current at their date of acquisition. The restated cost, or cost less depreciation, of each item is determined by applying to its historical cost and accumulated depreciation the change in a general price index from the date of acquisition to the end of the reporting period. For example, property, plant and equipment, inventories of raw materials and merchandise, goodwill, patents, trademarks and similar assets are restated from the dates of their purchase. Inventories of partly-finished and finished goods are restated from the dates on which the costs of purchase and of conversion were incurred.
19 The restated amount of a non-monetary item is reduced, in accordance with appropriate Australian Accounting Standards, when it exceeds its recoverable amount. For example, restated amounts of property, plant and equipment, goodwill, patents and trademarks are reduced to recoverable amount and restated amounts of inventories are reduced to net realisable value.
20 An investee that is accounted for under the equity method may report in the currency of a hyperinflationary economy. The statement of financial position and statement of comprehensive income of such an investee are restated in accordance with this Standard in order to calculate the investor’s share of its net assets and profit or loss. When the restated financial statements of the investee are expressed in a foreign currency they are translated at closing rates.
28 The gain or loss on the net monetary position is included in profit or loss. The adjustment to those assets and liabilities linked by agreement to changes in prices made in accordance with paragraph 13 is offset against the gain or loss on net monetary position. Other income and expense items, such as interest income and expense, and foreign exchange differences related to invested or borrowed funds, are also associated with the net monetary position. Although such items are separately disclosed, it may be helpful if they are presented together with the gain or loss on net monetary position in the statement of comprehensive income.
34 Corresponding figures for the previous reporting period, whether they were based on a historical cost approach or a current cost approach, are restated by applying a general price index so that the comparative financial statements are presented in terms of the measuring unit current at the end of the reporting period. Information that is disclosed in respect of earlier periods is also expressed in terms of the measuring unit current at the end of the reporting period. For the purpose of presenting comparative amounts in a different presentation currency, paragraphs 42(b) and 43 of AASB 121 apply.
Amendment to AASB 131
49 Paragraph 1 is amended to read as follows:
1 This Standard shall be applied in accounting for interests in joint ventures and the reporting of joint venture assets, liabilities, income and expenses in the financial statements of venturers and investors, regardless of the structures or forms under which the joint venture activities take place. However, it does not apply to venturers’ interests in jointly controlled entities held by:
(a) venture capital organisations, or
(b) mutual funds, unit trusts and similar entities including investment-linked insurance funds
that upon initial recognition are designated as at fair value through profit or loss or are classified as held for trading and accounted for in accordance with AASB 139 Financial Instruments: Recognition and Measurement. Such investments shall be measured at fair value in accordance with AASB 139, with changes in fair value recognised in profit or loss in the period of the change. A venturer holding such an interest shall make the disclosures required by paragraphs 55 and 56.
50 The heading “Effective Date” above paragraph 58 is changed to “Effective Date and Transition”.
51 Paragraph 58B is added:
58B Paragraph 1 was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact and apply for that earlier period the amendments to paragraph 3 of AASB 7 Financial Instruments: Disclosures, paragraph 1 of AASB 128 and paragraph 4 of AASB 132 Financial Instruments: Presentation issued in July 2008. An entity is permitted to apply the amendment prospectively.
Amendment to AASB 132
52 Paragraph 4(a) is amended to read as follows:
4 This Standard shall be applied by all entities to all types of financial instruments except:
(a) those interests in subsidiaries, associates, or joint ventures that are accounted for in accordance with AASB 127 Consolidated and Separate Financial Statements, AASB 128 Investments in Associates or AASB 131 Interests in Joint Ventures. However, in some cases, AASB 127, AASB 128 or AASB 131 permits an entity to account for an interest in a subsidiary, associate or joint venture using AASB 139; in those cases, entities shall apply the requirements of this Standard. Entities shall also apply this Standard to all derivatives linked to interests in subsidiaries, associates or joint ventures;
(b) …
53 The heading “Effective Date of IAS 32” above paragraph 96 is changed to “Effective Date and Transition”.
54 Paragraph 97D is added:
97D Paragraph 4 was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact and apply for that earlier period the amendments to paragraph 3 of AASB 7, paragraph 1 of AASB 128 and paragraph 1 of AASB 131 issued in July 2008. An entity is permitted to apply the amendment prospectively.
Amendment to AASB 134
55 Paragraph 11 is amended to read as follows and a footnote added:
11 In the statement that presents the components of profit or loss for an interim period, an entity shall present basic and diluted earnings per share for that period when the entity is within the scope of AASB 133 Earnings per Share.1.
1This paragraph was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008 to clarify the scope of AASB 134.
Amendments to AASB 136
56 Paragraphs 2, 5 and 134(e) are amended to read as follows:
2 This Standard shall be applied in accounting for the impairment of all assets, other than:
(a) …
(g) biological assets related to agricultural activity that are measured at fair value less costs to sell (see AASB 141 Agriculture);
(h) ...
5 This Standard does not apply to financial assets within the scope of AASB 139, investment property measured at fair value in accordance with AASB 140, or biological assets related to agricultural activity measured at fair value less costs to sell in accordance with AASB 141. However, this Standard applies to assets that are carried at revalued amount (ie fair value) in accordance with other Australian Accounting Standards, such as the revaluation model in AASB 116 Property, Plant and Equipment. Identifying whether a revalued asset may be impaired depends on the basis used to determine fair value:
(a) …
134 An entity shall disclose the information required by (a)–(f) for each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant in comparison with the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives:
(a) …
(e) if the unit’s (group of units’) recoverable amount is based on fair value less costs to sell, the methodology used to determine fair value less costs to sell. If fair value less costs to sell is not determined using an observable market price for the unit (group of units), the following information shall also be disclosed:
(i) a description of each key assumption on which management has based its determination of fair value less costs to sell. Key assumptions are those to which the unit’s (group of units’) recoverable amount is most sensitive.
(ii) a description of management’s approach to determining the value (or values) assigned to each key assumption, whether those values reflect past experience or, if appropriate, are consistent with external sources of information, and, if not, how and why they differ from past experience or external sources of information.
If fair value less costs to sell is determined using discounted cash flow projections, the following information shall also be disclosed:
(iii) the period over which management has projected cash flows;
(iv) the growth rate used to extrapolate cash flow projections;
(v) the discount rate(s) applied to the cash flow projections;
(f) …
57 The heading “Transitional Provisions and Effective Date of IAS 36” above paragraph 138 is amended to read “Transitional Provisions and Effective Date”.
58 Paragraph 140C is added:
140C Paragraph 134(e) was amended by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply that amendment for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendment for an earlier period it shall disclose that fact.
59 Entities shall apply the amendment to paragraphs 2 and 5 of AASB 136 when they apply the ‘costs to sell’ amendment to paragraph 5 of AASB 141 set out in paragraph 74 of this Standard.
Amendments to AASB 138
60 Paragraphs 69, 70 and 98 are amended to read as follows:
69 In some cases, expenditure is incurred to provide future economic benefits to an entity, but no intangible asset or other asset is acquired or created that can be recognised. In the case of the supply of goods, the entity recognises such expenditure as an expense when it has a right to access those goods. In the case of the supply of services, the entity recognises the expenditure as an expense when it receives the services. For example, expenditure on research is recognised as an expense when it is incurred (see paragraph 54), except when it is acquired as part of a business combination. Other examples of expenditure that is recognised as an expense when it is incurred include:
(a) …
(c) expenditure on advertising and promotional activities (including mail order catalogues);
(d) …
70 Paragraph 68 does not preclude an entity from recognising a prepayment as an asset when payment for goods has been made in advance of the entity obtaining a right to access those goods. Similarly, paragraph 68 does not preclude an entity from recognising a prepayment as an asset when payment for services has been made in advance of the entity receiving those services.
98 A variety of amortisation methods can be used to allocate the depreciable amount of an asset on a systematic basis over its useful life. These methods include the straight-line method, the diminishing balance method and the unit of production method. The method used is selected on the basis of the expected pattern of consumption of the expected future economic benefits embodied in the asset and is applied consistently from period to period, unless there is a change in the expected pattern of consumption of those future economic benefits.
61 Paragraph 69A is added:
69A An entity has a right to access goods when it owns them. Similarly, it has a right to access goods when they have been constructed by a supplier in accordance with the terms of a supply contract and the entity could demand delivery of them in return for payment. Services are received when they are performed by a supplier in accordance with a contract to deliver them to the entity and not when the entity uses them to deliver another service, for example, to deliver an advertisement to customers.
62 The heading “Transitional Provisions and Effective Date of IAS 38” is amended to read “Transitional Provisions and Effective Date”.
63 Paragraph 130D is added:
130D Paragraphs 69, 70 and 98 were amended and paragraph 69A was added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
Amendments to AASB 139
64 Paragraphs 9, 73 and AG8 are amended to read as follows:
9 The following terms are used in this Standard with the meanings specified:
…
Definitions of Four Categories of Financial Instruments
A financial asset or financial liability at fair value through profit or loss is a financial asset or financial liability that meets either of the following conditions:
(a) it is classified as held for trading. A financial asset or financial liability is classified as held for trading if:
(i) it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
(ii) on initial recognition it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or
(iii) it is a derivative (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument);
(b) ...
73 For hedge accounting purposes, only instruments that involve a party external to the reporting entity (ie external to the group or individual entity that is being reported on) can be designated as hedging instruments. Although individual entities within a consolidated group or divisions within an entity may enter into hedging transactions with other entities within the group or divisions within the entity, any such intragroup transactions are eliminated on consolidation. Therefore, such hedging transactions do not qualify for hedge accounting in the consolidated financial statements of the group. However, they may qualify for hedge accounting in the individual or separate financial statements of individual entities within the group provided that they are external to the individual entity that is being reported on.
AG8 If an entity revises its estimates of payments or receipts, the entity shall adjust the carrying amount of the financial asset or financial liability (or group of financial instruments) to reflect actual and revised estimated cash flows. The entity recalculates the carrying amount by computing the present value of estimated future cash flows at the financial instrument’s original effective interest rate or, when applicable, the revised effective interest rate calculated in accordance with paragraph 92. The adjustment is recognised in profit or loss as income or expense.
65 Paragraph 50A is added:
50A The following changes in circumstances are not reclassifications for the purposes of paragraph 50:
(a) a derivative that was previously a designated and effective hedging instrument in a cash flow hedge or net investment hedge no longer qualifies as such;
(b) a derivative becomes a designated and effective hedging instrument in a cash flow hedge or net investment hedge;
(c) financial assets are reclassified when an insurance company changes its accounting policies in accordance with paragraph 45 of AASB 4.
66 The heading “Effective Date of AASB 139 and Transition” above paragraph 103 is amended to read “Effective Date and Transition”.
67 Paragraph 108C is added:
108C Paragraphs 9, 73 and AG8 were amended and paragraph 50A added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2009. An entity shall apply the amendments in paragraphs 9 and 50A as of the date and in the manner it applied the 2005 amendments described in paragraph 105A. Earlier application of all the amendments is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
Amendments to AASB 140
68 Paragraphs 8, 9, 31, 48, 50, 53, 54 and 57 are amended to read as follows:
8 The following are examples of investment property:
(a) …
(c) a building owned by the entity (or held by the entity under a finance lease) and leased out under one or more operating leases;
(d) a building that is vacant but is held to be leased out under one or more operating leases; and
(e) property that is being constructed or developed for future use as investment property.
9 The following are examples of items that are not investment property and are therefore outside the scope of this Standard:
(a) …
(d) [deleted by the IASB]
(e) …
31 AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors states that a voluntary change in accounting policy shall be made only if the change results in the financial statements providing reliable and more relevant information about the effects of transactions, other events or conditions on the entity’s financial position, financial performance or cash flows. It is highly unlikely that a change from the fair value model to the cost model will result in a more relevant presentation.
48 In exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the variability in the range of reasonable fair value estimates will be so great, and the probabilities of the various outcomes so difficult to assess, that the usefulness of a single estimate of fair value is negated. This may indicate that the fair value of the property will not be reliably determinable on a continuing basis (see paragraph 53).
50 In determining the carrying amount of investment property under the fair value model, an entity does not double-count assets or liabilities that are recognised as separate assets or liabilities. For example:
(a) ...
(d) the fair value of investment property held under a lease reflects expected cash flows (including contingent rent that is expected to become payable). Accordingly, if a valuation obtained for a property is net of all payments expected to be made, it will be necessary to add back any recognised lease liability, to arrive at the carrying amount of the investment property using the fair value model.
53 There is a rebuttable presumption that an entity can reliably determine the fair value of an investment property on a continuing basis. However, in exceptional cases, there is clear evidence when an entity first acquires an investment property (or when an existing property first becomes investment property after a change in use) that the fair value of the investment property is not reliably determinable on a continuing basis. This arises when, and only when, comparable market transactions are infrequent and alternative reliable estimates of fair value (for example, based on discounted cash flow projections) are not available. If an entity determines that the fair value of an investment property under construction is not reliably determinable but expects the fair value of the property to be reliably determinable when construction is complete, it shall measure that investment property under construction at cost until either its fair value becomes reliably determinable or construction is completed (whichever is earlier). If an entity determines that the fair value of an investment property (other than an investment property under construction) is not reliably determinable on a continuing basis, the entity shall measure that investment property using the cost model in AASB 116. The residual value of the investment property shall be assumed to be zero. The entity shall apply AASB 116 until disposal of the investment property.
54 In the exceptional cases when an entity is compelled, for the reason given in paragraph 53, to measure an investment property using the cost model in accordance with AASB 116, it measures at fair value all its other investment property including investment property under construction. In these cases, although an entity may use the cost model for one investment property, the entity shall continue to account for each of the remaining properties using the fair value model.
57 Transfers to, or from, investment property shall be made when, and only when, there is a change in use, evidenced by:
(a) …
(c) end of owner occupation, for a transfer from owner-occupied property to investment property; or
(d) commencement of an operating lease to another party, for a transfer from inventories to investment property.
(e) [deleted by the IASB]
69 Paragraph 22 is deleted and a note added as follows:
22 [Deleted by the IASB]
70 Paragraphs 53A and 53B are added:
53A Once an entity becomes able to measure reliably the fair value of an investment property under construction that has previously been measured at cost, it shall measure that property at its fair value. Once construction of that property is complete, it is presumed that fair value can be measured reliably. If this is not the case, in accordance with paragraph 53, the property shall be accounted for using the cost model in accordance with AASB 116.
53B The presumption that the fair value of investment property under construction can be measured reliably can be rebutted only on initial recognition. An entity that has measured an item of investment property under construction at fair value may not conclude that the fair value of the completed investment property cannot be determined reliably.
71 The heading “Effective Date of IAS 40” above paragraph 85 is changed to “Effective Date”.
72 Paragraph 85B is added:
85B Paragraphs 8, 9, 48, 53, 54 and 57 were amended, paragraph 22 was deleted and paragraphs 53A and 53B were added by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments prospectively for annual reporting periods beginning on or after 1 January 2009. An entity is permitted to apply the amendments to investment property under construction from any date before 1 January 2009 provided that the fair values of investment properties under construction were determined at those dates. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact and at the same time apply the amendments to paragraphs 5 and 81E of AASB 116 Property, Plant and Equipment.
Amendments to AASB 141
73 The terms ‘estimated point-of-sale costs’ and ‘point-of-sale costs’ are replaced by ‘costs to sell’ where they appear in paragraphs 12, 13, 26-28, 30-32, 34, 35, 38, 40, 48, 50 and 51 of AASB 141.
74 Paragraphs 4, 5, 6, 17, 20, 21, 34-36 are amended to read as follows:
4 The table below provides examples of biological assets, agricultural produce, and products that are the result of processing after harvest:
Biological assets
Agricultural produce
Products that are the result of processing after harvest
…
Trees in a plantation forest
Felled trees
Logs, lumber
…
5 The following terms are used in this Standard with the meanings specified:
Agricultural activity is the management by an entity of the biological transformation and harvest of biological assets for sale or for conversion into agricultural produce or into additional biological assets.
…
Costs to sell are the incremental costs directly attributable to the disposal of an asset, excluding finance costs and income taxes.
…
6 Agricultural activity covers a diverse range of activities; for example, raising livestock, forestry, annual or perennial cropping, cultivating orchards and plantations, floriculture and aquaculture (including fish farming). Certain common features exist within this diversity:
(a) …
(c) Measurement of change. The change in quality (for example, genetic merit, density, ripeness, fat cover, protein content, and fibre strength) or quantity (for example, progeny, weight, cubic metres, fibre length or diameter, and number of buds) brought about by biological transformation or harvest is measured and monitored as a routine management function.
17 If an active market exists for a biological asset or agricultural produce in its present location and condition, the quoted price in that market is the appropriate basis for determining the fair value of that asset. If an entity has access to different active markets, the entity uses the most relevant one. For example, if an entity has access to two active markets, it would use the price existing in the market expected to be used.
20 In some circumstances, market-determined prices or values may not be available for a biological asset in its present condition. In these circumstances, an entity uses the present value of expected net cash flows from the asset discounted at a current market-determined rate in determining fair value.
21 The objective of a calculation of the present value of expected net cash flows is to determine the fair value of a biological asset in its present location and condition. An entity considers this in determining an appropriate discount rate to be used and in estimating expected net cash flows. In determining the present value of expected net cash flows, an entity includes the net cash flows that market participants would expect the asset to generate in its most relevant market.
34 An unconditional government grant related to a biological asset measured at its fair value less costs to sell shall be recognised in profit or loss when, and only when, the government grant becomes receivable.
35 If a government grant related to a biological asset measured at its fair value less costs to sell is conditional, including when a government grant requires an entity not to engage in specified agricultural activity, an entity shall recognise the government grant in profit or loss when, and only when, the conditions attaching to the government grant are met.
36 Terms and conditions of government grants vary. For example, a grant may require an entity to farm in a particular location for five years and require the entity to return all of the grant if it farms for a period shorter than five years. In this case, the grant is not recognised in profit or loss until the five years have passed. However, if the terms of the grant allow part of it to be retained according to the time that has elapsed, the entity recognises that part in profit or loss as time passes.
75 Paragraph 14 is deleted and a note added as follows:
14 [Deleted by the IASB]
76 The heading “Effective Date of IAS 41 and Transition” above paragraph 58 is amended to read “Effective Date and Transition”.
77 Paragraph 60 is added:
60 Paragraphs 5, 6, 17, 20 and 21 were amended and paragraph 14 deleted by AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project issued in July 2008. An entity shall apply those amendments prospectively for annual reporting periods beginning on or after 1 January 2009. Earlier application is permitted. If an entity applies the amendments for an earlier period it shall disclose that fact.
78 Entities shall apply the amendments to paragraphs 34-36 of AASB 141 when they apply the related amendments in terminology used in AASB 120.
Amendments to AASB 1023
79 Paragraphs 15.5 and 15.5.2 are amended to read as follows:
15.5 When preparing separate financial statements, those investments in subsidiaries, jointly controlled entities and associates that:
(a) are defined by AASB 127 Consolidated and Separate Financial Statements, AASB 128 Investments in Associates and AASB 131 Interests in Joint Ventures;
(b) back general insurance liabilities; and
(c) are permitted to be designated as “at fair value through profit or loss” under AASB 139;
shall be designated as “at fair value through profit or loss” under AASB 139, on first application of this Standard or on initial recognition.
15.5.2 In the parent’s separate financial statements, investments in subsidiaries, jointly controlled entities and associates that are within the scope of AASB 127, that the insurer considers back general insurance liabilities, and that are permitted to be designated as “at fair value through profit or loss” under AASB 139, are designated as “at fair value through profit or loss” under AASB 139, on first application of this Standard or on initial recognition.
Amendments to AASB 1038
80 Paragraphs 10.7 and 10.7.2 are amended to read as follows:
10.7 When preparing separate financial statements, those investments in subsidiaries, jointly controlled entities and associates that:
(a) are within the scope of AASB 127 Consolidated and Separate Financial Statements;
(b) back life insurance liabilities or life investment contract liabilities; and
(c) are permitted to be designated as “at fair value through profit or loss” under AASB 139;
shall be designated as “at fair value through profit or loss” under AASB 139, on first application of this Standard or on initial recognition.
10.7.2 In the parent’s separate financial statements, investments in subsidiaries, jointly controlled entities and associates, that are within the scope of AASB 127, that the insurer considers back life insurance liabilities or life investment contract liabilities, and that are permitted to be designated as “at fair value through profit or loss” under AASB 139, are designated as “at fair value through profit or loss” under AASB 139, on first application of this Standard or on initial recognition.
