EXPLANATORY STATEMENT
Standards Amended by AASB 2008-10
This Standard makes amendments to the
following Australian Accounting Standards:
1.
AASB 139 Financial Instruments: Recognition and Measurement;
and
2.
AASB 7 Financial Instruments: Disclosures.
The amendments follow the issuance of corresponding
amendments made by the International Accounting Standards Board in October 2008.
Main Features of this Standard
Application Date
The amendments to AASB
139 shall be applied from 1 July 2008. An entity shall not reclassify a
financial asset in accordance with paragraph 50B, 50D or 50E before 1 July
2008. Any reclassifications of a financial asset, in accordance with paragraph
50B, 50D or 50E, made in periods beginning on or after
1 November 2008, shall take effect only from the date when the
reclassification is made. Any reclassification of a financial asset in
accordance with paragraph 50B, 50D or 50E shall not be applied retrospectively
to reporting periods ended before the effective date set out in this paragraph.
The amendments to AASB 7 shall be applied from 1 July
2008.
Main Requirements
The amendments to AASB 139 permit an entity to:
(a) 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:
(i) there are rare circumstances; or
(ii) 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
(b) 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.
The amendments to AASB 7 specify the disclosures required
by an entity that reclassifies financial assets out of fair value through
profit or loss in accordance with the amendments to AASB 139 made by this
Standard.
Consultation Prior to Issuing AASB 2008-10
In response to concerns regarding the credit crisis and
pressures to reduce the differences between IFRSs and US GAAP, the IASB issued Reclassification
of Financial Assets (Amendments to IAS 39 Financial Instruments:
Recognition and Measurement and IFRS 7 Financial Instruments:
Disclosures) on 13 October 2008 without due process. The AASB, at its 10 October
2008 meeting, decided that it would rapidly respond (i.e. suspend its own due
process) if the IASB urgently amended IAS 39, to ensure that Australian
constituents would have available, on a timely basis, the same treatments as
other constituents applying IFRSs. The Board notes that a critical date in the
effective date paragraph set by the IASB is only 18 days after the IASB issued
its amendments. Therefore, the AASB issued AASB 2008-10 without
constituent consultation. The AASB regards the events leading up to the issue
of AASB 2008-10 as being extraordinary and continues to regard due process as a
critical feature of standard setting in the normal course of events.
A Regulation Impact Statement has not been prepared in
connection with the issue of AASB 2008-10 as the amendments made do not
have a substantial direct or indirect impact on business or competition, are of
a minor or machinery nature or clarify existing requirements.