Archive for the ‘AASB’ Category

Reporting an entities expenses on the Statement of Profit & Loss and Other Comprehensive Income

Monday, May 4th, 2015

Carmen Ridley outlines how expenses are best reported.


Entities have a choice about how to report their expenses on the face of the statement of profit & loss and other comprehensive income  – by either nature or function, but what does this actually mean?

Expense type Description Example
Type of expense?
Raw materials consumed
Changes in work in progress and finished goods
Employee expenses
What function of the business has generated the expense?
Cost of sales
Marketing expenses
Distribution costs
Administrative expenses

Entities who present cost of sales, depreciation and employee expenses on the face of the Statement of Profit & Loss and Other Comprehensive Income are in breach of AASB 101 Presentation of Financial Statements – this is a mandatory standard for Corporations Act entities.

Additional disclosures:
–          If an entity presents expenses by nature then cost of sales should be disclosed in the notes;

–          If an entity presents expenses by function then depreciation and employee expenses should be disclosed in the notes.

For more clarification, get in touch with Carmen Ridley (cridley@afrs.com.au).


Other Comprehensive Income – Include as a line item even if I don’t have any items to include?

Monday, May 4th, 2015

Carmen Ridley (AASB Board member and Principal – Australian Financial Reporting Solutions www.afrs.com.au) ansers:

“If I don’t have any items of other comprehensive income, do I still need to include the line item of “other comprehensive income” on the face of the statement?

Total other comprehensive income is a required heading per AASB 101 Presentation of Financial Statements and therefore even if an entity does not have other comprehensive income, the heading shall be included with nil total to show the two components making up Total Comprehensive Income, i.e. result for the year plus Other Comprehensive Income.


Financial Reports: IFRS or AASB standards referenced in the ‘standards issued not yet effective note’?

Wednesday, December 10th, 2014

Carmen Ridley (AASB Board Member & Principal, Australian Financial Reporting Solutions www.afrs.com.au) suggests:

Do I have to include standards which have been issued by the International Accounting Standards Board (IASB) but not issued by the Australian Accounting Standards Board (AASB) in the standards issued not yet effective note in my financial statements?

The answer to this question is “it depends!”, refer to the table below which hopefully makes it clear:

Type of Entity IFRS Compliance Consider IFRS standards?
For profit AND
Preparing Tier 1 general purpose financial statements
Yes Yes
All other entities No No

Note: the standards issued not yet effective disclosure should only include standards which are relevant to the entity.

For the latest  AASB Standards Issues Not Yet Effective list compiled by Carmen Ridley, go to this CaseWare Australia & New Zealand technical FAQ on our website.

For more information on AASB or IFRS standards, please email Carmen Ridley: cridley@afrs.com.au.



Disclosures for subsidiaries, joint ventures and associates

Monday, December 8th, 2014

If you are working on disclosures for subsidiaries, joint arrangements (joint ventures or joint operations) or associates then all disclosures are covered in AASB 12 Disclosures of Interests in Other Entities rather than in the specific standards. Refer to the disclosure checklist for AASB 12 for a complete list of required disclosures.

If you are preparing reduced disclosure requirements financial statements (RDR) then don’t forget to use the RDR checklist as the level of disclosures is significantly reduced for this standard.

For further information, please contact Carmen Ridley on cridley@afrs.com.au.


Carmen Ridley’s Consolidations Webinar – Notes Summary

Thursday, November 6th, 2014

The following article is a summary of Carmen Ridley’s Consolidations online webinar held on October 30, 2014. Carmen will be conducting another webinar for CaseWare Australia & New Zealand on how to “Avoid Common Mistakes in Financial Reports – Cut the Clutter, Tips & Traps” on  November 27.

One of the key aspects of AASB 10 is the Definition of Control. To define whether an entity should be consolidated into the Financial Reports, the 3 components listed in AASB 10 must be satisfied.  In regard to Not For Profits (NFPs), there is a guidance note which provides NFP examples for the definition of control which appears as AASB 2013-8 (and will eventually be included as an appendix within AASB 10).

Those 3 key components are:

  • Power
  • Rights
  • Returns (For NFPs this can be related to social policy, even if it is not related to financial aspects, which can be quite hard to define and measure.)

De facto control is also another aspect required to be considered. A 50%+ shareholding is no longer the only relevant measure of entity control – aspects of major shareholders, plus voting rights and patterns may be a better indicator of the controlling entity. This aspect of control requires much more detailed examination AND on a yearly basis, than prior determinations.

AASB 12 which details Interests in Other Entities can be quite an onerous standard. The following should be considered and assessed (nb: not applicable for special pupose financials):

  • named subsiduaries
  • joint arrangements / ventures
  • associations
  • unconsolidated structed entities.

This group of Consolidation standards (AASB 10-12) requires continuous assesment, particularly in relation to control. If circumstances, shareholdings or management change even slightly, it may mean that control of the entity may be in a state of flux and needs to be rejustified annually.

Overall, these standards require significant judgements and assumptions. Interpretation of the standards is the key to getting the reporting requirements correct. Appropriate disclosures are obviously required and should be as helpful and explanatory as possible.

 Carmen Ridley can be contacted directly via her email (cridley@afrs.com.au) for further assistance, explanation or application of the AASB standards.



AASB 9 Financial Instruments – Change to application date – now, 1 Jan 2018

Tuesday, October 14th, 2014

Don’t forget to confirm that you have included to correct application date for AASB 9 Financial Instruments in your standards issued not yet effective note – the correct application date is annual reporting periods beginning on or after 1 January 2018.

The application date was changed recently by the AASB from 2017 to 2018.



Latest from the AASB – Meeting held Sept 3 & 4 2014

Wednesday, September 17th, 2014

Carmen Ridley, AASB Board Member provides a summary of key discussions from the latest AASB meeting affecting small to medium accounting firms and entities in Australia.

Implementation of AASB 13 Fair Value Measurement – two topics were  discussed in relation to this:

  1. Disclosures in the NFP Public Sector – consideration of the need to modify disclosures given the level of assets which are held at fair value.  Feedback has been received from a number of local Councils in NSW but we would love to hear from other entities or other states about issued faced.  Please contact the AASB directly or feel free to shoot me an email with issues (cridley@afrs.com.au).
  2. Current replacement cost v depreciated replacement cost – AASB 136 Impairment of Assets allows NFP entities to use depreciated replacement cost (DRC) to determine the value in use of an asset / cash-generating unit if certain conditions are met.  The AASB discussed whether this is the same as the concept of current replacement cost used in AASB 13 to determine fair value and noted that DRC as used in AASB 136 is not the same as CRC as used in AASB 13.  AASB staff will draft a clarification for approval by the Board.

Income for NFP entities – the Board reviewed a draft of the paper relating to NFP income and confirmed most earlier decisions in light of the release of IFRS 15 Revenue from Contracts with Customers.  The expected issue date of the exposure draft of the NFP revenue standard is Quarter 4 of 2014.

Recyclable assets – an issue was raised about the accounting treatment and residual value of recyclable assets, initially in relation to roads but could be applied to all recyclable assets.  Further outreach is being undertaken and therefore if you have any experience with recyclable assets, particularly in the for-profit sector then please contact the AASB directly or Carmen via cridley@afrs.com.au.

Additional information on any of these topics or the other items discussed at the meeting can be found in the Action Alert, available here:



Recognition of Exploration & Evaluation Assets – Timely Reminder

Wednesday, September 3rd, 2014

AASB Board Member and principal of Australian Financial Reporting Solutions, Carmen Ridley offers this advice to auditors and reporters for entities in mining and exploration concerns.

ASIC have issued a media release regarding the write off of a $3.8m exploration and evaluation asset in an ASX listed entity’s financial report (14-215MR).

In this instance, the company’s exploration licence for the projects had expired yet the company was continuing to defer expenses as an asset on the balance sheet.

Entities and their auditors should confirm that initial and subsequent recognition of exploration and evaluation assets is appropriate and in accordance with the requirements of AASB 6 Exploration and Evaluation for Mineral Resources.

Any assets which no longer satisfy the requirements in AASB 6 must be immediately written off.

For further information on deferral of expenses, please contact Carmen Ridley via cridley@afrs.com.au.


AASB 13 and Prospective Application

Monday, August 11th, 2014

AASB 13 Fair Value Measurement is required to be applied prospectively for annual reporting periods beginning on or after 1 January 2013.

Questions have been raised about what prospective application means, the application has been illustrated below for a 30 June 2014 year end.


30 June 2014

Measurement of fair value in accordance with AASB 13


All fair values reported in accordance with AASB 13


No restatement of reported fair value figures

Fair value disclosures in accordance with AASB 13


AASB 13 disclosures required for all assets / liabilities recorded at fair value


No comparative disclosures required

Whilst neither disclosure nor restatements are required for comparative figures, all assets or liabilities recorded at fair value in the current year need to be determined in accordance with AASB 13 regardless of the date of valuation.

Valuations performed before the current reporting period
If a valuation (independent or directors) was performed prior to the start of the current reporting period (i.e. 1 July 2013 for 30 June 2014 reporting periods), then an entity will need to determine whether this valuation was performed in accordance with the AASB 13 methodology and whether the required AASB 13 disclosures can be provided.

There is no need for prior year restatements, however an entity needs to comply with AASB 13 in the current year and therefore disclosures and AASB 13 methodology are required for ALL assets and liabilities disclosed or measured at fair value at 30 June 2014.

For further information, please contact Carmen Ridley on cridley@afrs.com.au.


AASB Meeting Report – July, by Carmen Ridley, AASB Board Member

Friday, August 8th, 2014

The AASB held their last meeting on 16 – 17 July and Carmen Ridley, AASB member provides an update on the most relevant areas to smaller, medium practices and entities.

  • IFRS 15 Revenue from Contracts with Customers has been released by the International Accounting Standards Board (IASB) and an education session was held for the AASB then the Board confirmed the disclosures required by entities preparing reduced disclosure requirement (RDR) financials under the Australian Accounting Standards.
  • Reporting entities – AASB staff are to meet with ASIC and Treasury staff in relation to amending the scope of AASB 101, 107, 108, 1048 and 1054 to apply to reporting entities / general purpose financial statements only
  • AASB 13 – clarification has been sought from the AASB about the use of the cost approach under AASB 13 for not-for-profit entities – this will be further discussed at the September meeting.

Further topics of discussion can be seen in AASB Action Alert. For questions or clarification on any matters, please contact Carmen Ridley via email: cridley@afrs.com.au.