The following are summaries taken from our weekly publication Accounting & Assurance News Today of the new omnibus standards released by the AASB.

• AASB 2008-11 
  Amendments to Australian Accounting Standard – Business Combinations Among Not-for-Profit Entities [AASB 3] 
   
  The Australian Accounting Standards Board (AASB) has issued AASB 2008-11 Amendments to Australian Accounting Standard – Business Combinations Among Not-for-Profit Entities [AASB 3], which has the effect of requiring assets acquired in a merger of not-for-profit entities to be re-measured, normally at fair value, as at the date of the merger. AASB 2008-11 applies to reporting periods beginning on or after 1 July 2009, with early adoption permitted for reporting periods beginning on or after 30 June 2007. 
   
  The AASB decision is consistent with its transaction-neutral approach to setting accounting standards, whereby, in the absence of a compelling reason to do otherwise, transactions such as business combinations are accounted for consistently, irrespective of whether the transactions occur in the for-profit or not-for-profit sectors. In addition, AASB 2008-11 has the affect of requiring any gain that results from a merger to be recognised in profit or loss. 
   
  AASB 2008-11 specifies different requirements for local governments for which the AASB decided to maintain the status quo for now, giving local governments the choice as to whether to re-measure assets acquired in an amalgamation of local governments. 
   
  The Board will revisit local government requirements in due course when it considers the more fundamental issue of control in the public sector, which will include consideration of whether state governments control local governments and what the accounting implications might be. 
   
  
• AASB 2008-10 
  Amendments to Australian Accounting Standards – Reclassification of Financial Assets 
   
  AASB 2008-10 was issued in response to the worldwide credit crisis. 
   
  As foreshadowed in ANT40/2008, the revisions allow non derivative financial assets held for trading and available-for-sale assets to be reclassified in particular situations. They are designed to address differences arising between IFRS and US GAAP in this area which are causing concern in the current economic climate and apply from 1 July 2008. They cannot be applied to financial reporting periods that ended before that date. 
   
  The amendments to AASB 139 permit an entity to:
  1. reclassify non-derivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit or loss category when the financial asset is no longer held for the purpose of selling or repurchasing in the near future, and either of the following apply:
     1. there are rare circumstances; or
      
     
     2. it would have met the definition of loans and receivables (if the financial asset had not been required to be held for trading at initial recognition); and
  2. transfer from the available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables (if the financial asset had not been designated as available for sale), if the entity has the intention and ability to hold that financial asset for the foreseeable future.
  Note that once an item is at amortised cost, any future changes in expected cash flows will be recognised as an adjustment to the effective interest rate and thereby be reflected in the profit or loss over the remaining holding period.  
   
  
• AASB 2008-9  
  Amendments to AASB 1049 for Consistency with AASB 101  
   
  AASB 2008-9 ensures consistency of terminology between public sector and private sector reporting. When AASB 1049 Whole of Government and General Government Sector Financial Reporting was revised and reissued in October 2007, it was drafted to comply with the then-current version of AASB 101 Presentation of Financial Statements. However, at that time AASB 101 was itself undergoing revision and it was reissued in September 2007 applicable for financial years beginning on or after 1 January 2009. This omnibus updates AASB 1049 for the changes made to AASB 101 effective from 1 January 2009. It also updates AASB 1049 for consequential changes associated with Omnibus 2007-8, which amended all other standards for the changes to AASB 101.  
   
  The main differences relate to the inclusion of a whole of government and General Government Sector (GGS) statement of changes in equity and clarification of the applicability of the whole of government operating statement and budget disclosures. The requirements of AASB 2008-9 are applicable from 1 January 2009, with early adoption permitted, provided the revised version of AASB 101 (September 2007) is also early adopted.  
   
  
• AASB 2008-8  
  Amendments to Australian Accounting Standards - Eligible Hedged Items 
   
  AASB 2008-8 clarifies how the existing principles underlying hedge accounting should be applied in two particular situations:
  • Designation of a one-sided risk in a hedged item; and
   
  
  • Designation of inflation in a financial hedged item
   
   
  It corresponds to amendments made by the IAS 39 in early August (see ANT30/2008).  
   
  Entities are required to apply this amendment retrospectively for annual reporting periods beginning on or after 1 July 2009, with early application permitted. 
   
  
• AASB 2008-7 
  Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 
   
  The AASB has issued AASB 2008-7, which amends AASB 127 Consolidated and Separate Financial Statements , AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, AASB 118 Revenue, AASB 121 The Effects of Changes in Foreign Exchange Rates and AASB 136 Impairment of Assets. These changes were exposed in Australia as ED 160 Proposed Amendments to AASB 1 and AASB 127 earlier this year. 
   
  The amendments allow first-time adopters to use a deemed cost of either fair value or the carrying amount under a previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. 
   
  Other amendments to note include:  
   
  
  • The removal of the cost method definition from AASB 127, replacing it with a requirement to present dividends as income in the separate financial statements of the investor  
    
  • The requirement for a new parent in a group reorganisation to measure the cost of its investment in the previous parent at the carrying amount of its share of the equity of the previous parent 
    
  • The removal from AASB 118 of the requirement to deduct pre-acquisition dividends from the cost of an investment in a subsidiary, jointly controlled entity or associate. All dividends are now recognised by the investor as income. This is matched by an amendment to AASB 136 stating that such a dividend may be an indicator of impairment
 
This Standard applies 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. 
 

• Improvements omnibuses AASB 2008-6 and AASB 2008-5 
   
  In May 2008, the International Accounting Standards Board (IASB) concluded the first of its annual improvements projects, with the objective of implementing necessary, but non-urgent, amendments to IFRSs that would not otherwise be incorporated in another major project (refer ANT21/2008, item 4). These projects, which commenced in 2007 and were initially exposed in Australia as ED 159, resulted in the IASB issuing the standard Improvements to IFRSs. It has now been released in Australia by the AASB as:  
   
  
  • AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Process and
   
  
  • AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process
 
There are two major types of changes being introduced: 
 

• Changes being made for presentation, recognition or measurement purposes. 24 separate issues were identified by the IASB amending 15 different IFRS which are now reflected in changes to AASBs. The majority of the changes have been included in omnibus 2008-5 however some changes (AASB 1 and 5) have been included as omnibus 2008-6 due to their different IASB application date
 

• Terminology or editorial changes that have a minimal effect on accounting practice. These changes affecting 11 standards have been included in AASB 2008-5
 
In total, Omnibus 2008-5 amends 24 standards whilst Omnibus 2008-6 amends a further 2. A summary of the issues involved is included in the preface to each standard. Members need to be aware of the changes, as they may affect the “issued but not operative” disclosures in their financial statements under paragraph 30 of AASB 108. For more details on these disclosures, refer to the Q&A in ANT28/2008. 
 
As you would expect from the objective of the Improvements standards, most of these changes are not expected to have a significant impact in Australia. However, we have listed below the presentation, recognition and measurement issues included in these standards in standard number order. The bold ones are those that have the most potential to be significant, as they either prescribe or eliminate treatments that could differ from those in use locally. 
 

• Plan to sell controlling interest in a subsidiary (AASB 1 and 5)
 

• Presentation of finance costs (AASB 7)
 

• Current/non-current classification of derivatives (AASB 101)
 

• Definition of recoverable amount (AASB 116)
 

• Presentation issues associated with sale of assets held for rental (AASB 116)
 

• Curtailments and negative past service costs (AASB 119)
 

• Definition of ‘return on plan assets’ (AASB 119)
 

• Replacement of ‘fall due’ terminology for classifying leave balances (AASB 119)
 

• Guidance on contingent liabilities (AASB 119)
 

• Government loans with below market interest rates (AASB 120)
 

• Components of borrowing costs (AASB 123)
 

• Measurement of subsidiary held for sale in separate financial
• statements (AASB 127)
 

• Impairment of investments in associates (AASB 128)
 

• Disclosures when associates are accounted for at fair value through profit and loss (AASB 128)  
  
• Disclosures when jointly controlled entities are accounted for at fair value through profit and loss (AASB 131)
 

• Description of measurement basis for financial statements (AASB 129)
 

• Disclosure of estimates used to determine recoverable amount (AASB 136)
 

• Advertising and promotional activities (AASB 138)
 

• Units of production amortisation (AASB 138)
 

• Reclassification of derivatives into or out of the fair value through profit or loss (AASB 139)
 

• Designating and documenting hedges at the segment level (AASB 139)
 

• Effective interest rates on cessation of fair value hedge accounting (AASB 139)
 

• ‘Investment Property’ definition to include property under construction for future use (AASB 140)
 

• Discount rates for fair value calculations (AASB 141)
 
For more details, KPMG has published a detailed summary of the changes, which is available on their website.  
 
AASB 2008-5 will apply to annual reporting periods beginning on or after 1 January 2009, and AASB 2008-6 to annual reporting periods beginning on or after 1 July 2009. 
 
Early adoption is permitted for both standards. Unlike other omnibus standards, Omnibus 2008-5 is structured so that each of its amendments can be considered separately for early adoption, although in some instances amendments are related and must be adopted at the same time. Omnibus 2008-6 affects only AASBs 1 and 5, and these amendments must be adopted together (and in conjunction with the amendment affecting AASB 127 in omnibus 2008-5). 
 
The improvements ED (Australian ED 159) also included a further seven issues that have not been included in the final standards issued. These were considered to be more significant issues and will be addressed by the IASB at a later date. 
 
The IASB intends to continue using the single ED process to make minor changes to its standards but has made revisions to the process in response to feedback received as part of the 2007 process. The 2008 improvements ED is expected to be issued later this month and finalised in early 2009. 
 
At its June meeting, the AASB expressed concern about the potentially cumbersome and confusing impact that an ongoing improvements process would have on the Australian process of amending standards by omnibus. More efficient ways of updating the standards are to be investigated.