Members' Update

Bulletin to Members
March 2004

Year 2005 Issues

Year 2005 Strategy
Intangible Assets
Year 2005 Disclosures
Share-based Payment

1. Year 2005 Strategy

The G100 wrote to the FRC Chairman recommending implementation of the Year 2005 strategy be deferred for one year or until such time as the European Union (EU) adopts IASB Standards. This is driven by:

concerns that the EU will not adopt IAS 32 and IAS 39 in their entirety;
proposals by the IASB to issue a further limited exposure draft in respect of measuring financial instruments at fair value; and
the implications of delays for the preparation by Australian companies to implement the Year 2005 strategy.

At its February meeting the FRC agreed to monitor IASB and EU developments regarding adoption of IASs. The FRC next meets on 31 March 2004.

2. Intangible Assets

The FRC confirmed that its Year 2005 directive meant that, to the extent that they do not conflict with Australian Law, IASB Standards should be adopted in their entirety. The FRC noted that in assessing that such adoption is in the best interests of the Australian economy it was possible that some companies might be adversely affected.

The implications of this clarification are that there is unlikely to be any joy for those companies seeking exemptions in respect of accounting for identifiable intangible assets on first-time adoption of IASB Standards.

3. Year 2005 Disclosures

The AASB considered submissions on ED 129 ‘Disclosing the Impact of Adopting AASB Equivalents to IASB Standards’ at its March meeting and agreed to prepare a Standard to require:

disclosure of an explanation about how the transition is being managed and a narrative explanation of the key differences in accounting policies in respect of annual or interim periods ending on or after 30 June 2004; and
in respect of annual periods ending on or after 30 June 2005, disclosure of known or reasonable estimable information relevant to assessing the possible impact on the current period had the financial report been prepared using the ‘new’ Standards or, if the impact is not known or reliably estimable, a statement to that effect.

The AASB also agreed to encourage those disclosures in respect of annual or interim periods ending on of after 31 December 2004.

The proposed approach is a step back from the proposals in ED 129 which were interpreted as requiring forecast financial information.

4. Share-based Payment

The AASB has approved AASB2 ‘Share-based Payment’ the Australian equivalent to IFRS2.

Differences between the recently issued AASB 1045 ‘Director and Executive Disclosures by Disclosing Entities’ will be reviewed by the IASB as part of the transition to AASB equivalents of IASB Standards.

Geoff Harris
March 2004