AASB 134 Interim Financial Reporting by hcj

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									         AASB 134 ‘Interim Financial Reporting’
                       Summary

OVERVIEW
   Accounting Standard AASB 134 ‘Interim Financial Reporting’ will replace
    AASB 1029 ‘Interim Financial Reporting’. It includes content specific to Australia
    in respect of application, guidance and disclosures and will apply from the interim
    period ending on or after 30 September 2005 (for entities with June year-ends).

   Interim financial reports are prepared by the Department of Treasury and Finance
    (DTF) for the whole-of-government Quarterly Financial Results Reports (QFRR) and
    by some public non-financial corporations such as Water Corporation, Western
    Power and the port authorities.

   AASB 134 prescribes for the preparation and presentation of interim financial
    reports and as such has no financial implications. However, there are minor
    presentation and disclosure differences to AASB 1029.

   The 30 September 2004 comparatives for the first QFRR for September 2005 quarter
    will need to be restated to the Australian equivalents to International Financial
    Reporting Standards (IFRS). DTF will need to determine how it is to gather and
    prepare comparative actuals data for quarterly reporting in 2005-06.

   Agencies will be required to provide source data for the preparation of the QFRR.

   AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial
    Reporting Standards’ requires reconciliations of existing GAAP to IFRS for the
    transitional provisions. Refer to ‘Transitional Provisions’ for details.


INTRODUCTION
AASB 134 and AASB 1029 prescribe the minimum content of interim financial reports
that are general purpose financial reports. The Standard applies to periods of any
length and allows presentation of either ‘complete’ or ‘condensed’ reports. Condensed
financial reports only contain minimum disclosures on the face of the financial
statements and include selected explanatory notes.

In the public sector, the application of AASB 1029 and AASB 134 is limited to the
government’s QFRR required by the Government Financial Responsibility Act, and the
interim financial reports presented by some public non-financial corporations such as
Western Power, Water Corporation and the port authorities, as required by their
enabling legislation.
AASB 134 will apply from the interim period ending 30 September 2005 (for entities
with June year-ends) and paragraph 20 specifies the periods that are to be included in
this report. As this will be the first interim financial report under the IFRS, the
transitional provisions of AASB 1 ‘First Time Adoption of Australian Equivalents to
International Financial Reporting Standards’ also apply and require the preparation
and presentation of certain reconciliations (see ‘Transitional Provisions’ below).


APPLICATION DATE
AASB 134 applies to interim period beginning on or after 1 January 2005
(paragraph Aus1.4).


TRANSITIONAL PROVISIONS
All first-time adopters of International Accounting Standards must follow the
transitional provisions in AASB 1 ‘First-time Adoption of Australian Equivalents to
International Financial Reporting Standards’.

AASB 1 (paragraph 38) requires an entity to explain how the transition from previous
GAAP to IFRS affected its reported financial position, financial performance and cash
flows. To comply with this requirement, entities must include reconciliations of its
equity and profit and loss in the first IFRS financial statements as detailed in
paragraph 39.

If an entity presented an interim financial report for the comparable interim period of
the immediately preceding financial year, the interim report must include
reconciliations of:

   its equity under previous GAAP at the end of the comparable interim period to its
    equity under IFRS at that date, and

   its profit or loss under previous GAAP for that comparable interim period, both
    current and year-to-date, to profit or loss under IFRS for that period.

In addition to the reconciliations required above, an entity’s first interim financial
report under AASB 134 for part of the period covered by its first IFRS financial report
shall include the reconciliations as required for explaining the transition to IFRS for
annual financial statements (AASB 1 paragraph 39) or a cross-reference to another
published documents that includes these reconciliations.

AASB 134 requires minimum disclosures, which are based on the assumption that
users of the interim financial report also have access to the most recent annual financial
report. However, AASB 134 also requires an entity to disclose any events or
transactions that are material to an understanding of the current interim period.
Therefore, if a first-time adopter did not, in its most recent annual financial report
under previous GAAP, disclose information material to an understanding of the




AASB 134                                                                           2 of 5
current interim period, its interim financial report shall disclose that information or
include a cross-reference to another published document that includes it.


KEY DIFFERENCES                 FROM        THE     EXISTING         AUSTRALIAN
STANDARD

Format

Where an interim financial report is prepared during the entity’s first annual reporting
period, AASB 1029 (paragraph 5.2(a)) requires the condensed balance sheet and
condensed cash flows statement to reflect the proposed format of the balance sheet and
cash flows statement in the next annual financial report. AASB 134 does not address
this issue.

Content of a condensed income statement

AASB 1029 (paragraph 5.2(b)) specifies the minimum content of a condensed income
statement, whereas AASB 134 (paragraph 10) is less specific and only requires a
condensed financial report to show at a minimum, each of the headings and subtotals
shown in the most recent annual financial report.

Disclosures

AASB 1029 requires disclosure of:

   the reporting date, or the interim reporting period covered by each interim
    financial statement, whichever is appropriate;

   a statement that the interim financial report is a general purpose financial report;
    and

   the measurement basis or bases used in preparing the interim financial report, if
    there is a change from the most recent annual financial report.

AASB 134 does not require such disclosures, however, the related provisions of
AASB 101 ‘Presentation of Financial Statement’ are applicable to interim financial
reports.

Definitions

Annual reporting periods and interim reporting periods

AASB 1029 (paragraphs 8.1.4, 9.1.1 and 9.1.2) contains commentary additional to that
in AASB 134 clarifying the definitions of and the relationship between annual
reporting periods and interim reporting periods.




AASB 134                                                                         3 of 5
Irregularity

AASB 1029 (paragraph 7.4.1) contains commentary to explain the meaning of
‘irregularity’. AASB 134 (paragraphs 16 and 37) uses the term ‘cyclicality’ instead of
the term ’irregularity’ without explanation.

Accounting Policies

Annually determined items

AASB 1029 (paragraphs 6.1.3 to 6.1.5) contains detailed commentary on the treatment
of annually determined items such as income taxes and annual profit related bonuses.
AASB 134 does not contain such commentary.

Revisions of estimates and correction of errors

AASB 1029 (paragraphs 6.4 to 6.4.3) incorporates requirements and commentary
relating to the revisions of estimates and corrections of errors. AASB 134 relies on the
general requirements contained in AASB 108 ‘Accounting Policies, Changes in
Accounting Estimates and Errors’.

Examples of the use of estimates

AASB 134 (Appendix C) contains examples of the use of estimates in preparing interim
financial reports, which are not in AASB 1029.

Additional requirements in AASB 1029 retained in AASB 134

AASB 134 retains the following requirements of AASB 1029, which are not in IAS 34:

   The Standard applies to interim financial reports that are general purpose financial
    reports (paragraph Aus1.1). The Standard clarifies that interim financial reports
    that are intended to be special purpose financial reports do not fall within its scope.
    Interim summary information, such as turnover and profit, voluntarily released by
    some entities, and monthly or quarterly government reports, are not considered to
    be general purpose financial reports.

   When voluntary disclosures in excess of the minimum required by AASB 134 are
    dealt with by other applicable Australian Accounting Standards, they must be
    made in a manner consistent with those Standards (paragraph Aus18.1).

   The interim financial report shall prominently display an explicit statement that it
    is to be read in conjunction with the most recent annual financial report
    (paragraph Aus16.3).

   Where an entity includes condensed financial statements in the interim financial
    report, these must be clearly labelled as such (paragraph Aus16.4).




AASB 134                                                                            4 of 5
   Where the interim financial report does not include notes normally included in an
    annual financial report, that fact shall be disclosed in the notes in the interim
    financial report (paragraph Aus16.4).

   AASB 134 includes a clarification that comparative interim periods (current or
    annual reporting period to date) refer to the corresponding calendar periods
    (paragraph Aus21.1).

   There are two note disclosures from AASB 1029 that are not required in IAS 34 but
    are retained in the new Standard:

       An indication, where possible, of the financial effect of each material events
        subsequent to the end of the interim period that have not been recognised
        (paragraph Aus16.1); and

       Disclosure in the annual financial report any change in accounting policy that
        has occurred during the final interim period of the year for which no separate
        interim report is published. The note disclosure shall include the nature and
        the financial effect of the change in accounting policy on prior interim financial
        reports (paragraph Aus27.1).


IMPACT OF DIFFERENCES

Effect on general reporting in the public sector

Application of AASB 134 in the public sector is limited to the whole of government
QFRR and agencies such as Western Power (quarterly reports), Water Corporation
(quarterly reports) and the Port Authorities (half-yearly reports) that produce interim
reports in accordance with their enabling legislation. Agencies will also be required to
provide source data for the preparation of the QFRR.

Effect on Treasurer’s Instructions (TIs) and Model Financial Statements

No impact.




AASB 134                                                                           5 of 5

								
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