Australian Government
Australian Accounting Standards Board
Thursday, December 22, 2022
The AASB has issued five Amending Standards, with a range of application dates. The Standards address non-current liabilities with covenants, editorial corrections and repeals of Standards, insurance contracts in the public sector (two Standards) and fair value measurements of non-financial assets of not-for-profit public sector entities not held primarily for their ability to generate net cash inflows.
The AASB has issued the following Amending Standards:
AASB 2022-6 amends AASB 101 Presentation of Financial Statements to improve the information an entity provides in its financial statements about long‑term liabilities with covenants where the entity’s right to defer settlement of those liabilities for at least twelve months after the reporting period is subject to the entity complying with conditions specified in the loan arrangement.
The amendments in AASB 2022-6 are effective for annual periods beginning on or after 1 January 2024, with earlier application permitted. AASB 2022-6 itself applies to periods beginning on or after 1 January 2023 in order to defer the revised liability classification requirements in AASB 101 from that date for another year.
AASB 2022-7 makes editorial corrections to six Standards and to Practice Statement 2 Making Materiality Judgements. It applies to annual periods beginning on or after 1 January 2023.
The repeal of superseded principal Standards and of redundant amending Standards does not change the application of any Standards or requirements. The repealed Standards cease to be classified as in-force legislative instruments on the Federal Register of Legislation. There is no change to the availability of the repealed Standards on the AASB website.
AASB 2022-8 applies to annual periods beginning on or after 1 January 2023, in order to defer the application of AASB 17 Insurance Contracts to for-profit public sector entities from that date until periods beginning on or after 1 July 2026.
AASB 2022-8 makes amendments to all Australian Accounting Standards that refer to AASB 17 to permit public sector entities (both for-profit and not-for-profit entities) to continue to apply AASB 4 Insurance Contracts and AASB 1023 General Insurance Contracts until annual periods beginning on or after 1 July 2026, when they are required to apply AASB 17. It also repeals AASB 1038 Life Insurance Contracts and Interpretation 1047 Professional Indemnity Claims Liabilities in Medical Defence Organisations for annual periods beginning on or after 1 January 2023, on the basis that AASB 17 applies to those periods in respect of private sector entities and the pronouncements are not relevant to public sector entities.
AASB 2022-9 makes public-sector-specific modifications to AASB 17 for application to annual periods beginning on or after 1 July 2026, with earlier application permitted.
The main modifications to AASB 17 include providing public sector entities with:
(a) pre-requisites, indicators and other considerations that need to be judged to identify arrangements that fall within the scope of AASB 17 in a public sector context;
(b) an exemption from sub-grouping onerous versus non-onerous contracts at initial recognition;
(c) an exemption from sub-grouping contracts issued no more than a year apart;
(d) an amendment to the initial recognition requirements so that they do not depend on when contracts become onerous; and
(e) an accounting policy choice to measure liabilities for remaining coverage applying the premium allocation approach.
AASB 2022-10 amends AASB 13 Fair Value Measurement for fair value measurements of non-financial assets of not-for-profit public sector entities not held primarily for their ability to generate net cash inflows. Specifically, for such an asset, this Standard:
(a) specifies that the entity is required to consider whether the asset’s highest and best use differs from its current use only when, at the measurement date, it is:
(i) classified as held for sale or held for distribution to owners in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations; or
(ii) highly probable that the asset will be used for an alternative purpose to its current use;
(b) clarifies that the asset’s use is ‘financially feasible’ if market participants would be willing to invest in the asset’s service capacity, considering both the capability of the asset to be used to provide needed goods or services to beneficiaries and the resulting cost of those goods or services;
(c) specifies that, if both the market selling price of a comparable asset and some market participant data required to measure the fair value of the asset are not observable, an entity uses its own assumptions as a starting point in developing unobservable inputs and adjusts those assumptions to the extent that reasonably available information indicates that other market participants (including, but not limited to, other not-for-profit public sector entities) would use different data; and
(d) provides guidance on how the cost approach is to be applied to measure the asset’s fair value, including guidance on the nature of costs to include in the replacement cost of a reference asset and on the identification of economic obsolescence.
AASB 2022-10 applies prospectively to annual periods beginning on or after 1 January 2024, with earlier application permitted.