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IFRS – The deadline was yesterday By now everyone has heard how much work the IFRS will cause and how we should have started yesterday, even though all the standards haven’t yet been released. There is simply far too much hype about the IFRS by people trying to create a new industry. In our view the impact on Local Government will be nowhere near as big as AAS27, and will basically just lead to some refinement, as happens every year. There is no International standard for Local Government, so most aspects of AAS27 will remain as is. Brisbane City Council have done extensive research into the impact of IFRS, and were pleasantly surprised that it will have virtually no impact on systems and business practices, although it will require some changes in the audited accounts. Although there are no International Standards for Local Government, a trap which could be overlooked is that their definition of not-for-profit organisations is extremely broad and appears to embrace Local Government.The adoption of the international accounting standards will and is having significant impacts on non-for-profit entities in Australia. The new standards will first apply to the annual reporting period beginning January 1, 2005 and ending December 31, 2005, meaning that full year comparative information using the new standards will be required for the 2004/05 financial year. As a consequence any new accounting policies, and systems and procedures will need to be up and running by 30 June, 2004, in order to allow the recording of transactions under the new and old standard.
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Key changes
According to the CPA website, under IAS 20, a government grant for the acquisition or construction of long-term assets requires the amount of the grant carried forward as deferred revenue, or as a deduction from the carrying amount of the asset. Under IAS 41, unconditional government grants are recognised immediately as revenue but only when the government grant becomes receivable. A conditional government grant is recognised immediately as revenue, but only when the conditions of the grant are met. AASB 1004 requires contributions of assets, including government grants, to be measured at the fair value of the contribution received or receivable, and recognised immediately as revenue. AASB has recently released ED 125 'Financial Reporting by Local Governments' which, among other things, proposes amending guidance on accounting for contributions/non-reciprocal transfers and, therefore, the recognition of liabilities/revenue (assets/expenses) of a transferee (transferor).
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By David Spearritt and Martin Pavelka
The effect of the proposed amendments is that, for example, in contrast with previous guidance, certain conditional grants initially give rise to a liability rather than revenue. The requirements and principles embodied in ED 125 will be used as the basis for the review of the accounting standards relating to the financial reporting of other public sector entities including government departments and state, territory and Australian governments.
‘Simplicity, simplicity, simplicity! I say, let your affairs be as two or three, and not a hundred or a thousand instead of a million count half a dozen, and keep your accounts on your thumb-nail’.Henry David Thoreau
Other Featured Articles - National Inquiry into Cost Shifting - Return to: Queensland Local Governmentt News February 2004 |
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