Australia
| Extent of IFRS application | Status | Additional Information |
|---|---|---|
| IFRS Accounting Standards are required for domestic public companies | Australian equivalents to IFRS Standards are required for all reporting entities, including listed companies and financial institutions. | |
| IFRS Accounting Standards are permitted but not required for domestic public companies | ||
| IFRS Accounting Standards are required or permitted for listings by foreign companies | Permitted. Alternatively foreign companies may use their home standards if approved by the stock exchange. | |
| The IFRS for SMEs Accounting Standard is required or permitted | Not permitted if the SME meets the definition of a reporting entity. For other SMEs, no specific accounting framework is required. | |
| The IFRS for SMEs Accounting Standard is under consideration | No. |
Profile last updated: 23 June 2017
RELEVANT JURISDICTIONAL AUTHORITY
The AASB is an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are:
- to develop a conceptual framework for the purpose of evaluating proposed standards;
- to make accounting standards under section 334 of the Corporations Act 2001;
- to formulate accounting standards for other purposes;
- to participate in and contribute to the development of a single set of accounting standards for worldwide use; and
- to advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy.
Australian Accounting Standards apply to:
- entities required by the Corporations Act 2001 to prepare financial reports;
- governments in preparing financial statements for the whole of government and the General Government Sector (GGS); and
- entities in the private or public for-profit or not-for-profit sectors that are reporting entities (as defined by Australian Accounting Standards) or that prepare general purpose financial statements.
COMMITMENT TO GLOBAL FINANCIAL REPORTING STANDARDS
Australia has adopted IFRS Standards since 1 January 2005. However, convergence with Standards issued by the Board and its predecessor, the IASC Board, had been occurring since 1996. Adoption from 2005 was through application of IFRS 1 First-time Adoption of International Financial Reporting Standards. Transitional disclosure requirements were specified in the year prior to adoption in AASB 1047 Disclosing the Impacts of Adopting Australian Equivalents to International Financial Reporting Standards.
When Australia initially adopted IFRS Standards as of 2005, the AASB made a number of changes to IFRS Standards, including elimination of accounting policy options and addition of disclosures. In 2007, the AASB approved an 'Amending Standard' that rescinded the changes that the AASB had made to IFRS when it initially adopted them as Australian Equivalents of IFRS Standards. Those amendments were effective 1 July 2007. However some additional disclosures still remain.
Australia has two Tiers of reporting requirements for preparing general purpose financial statements:
- Tier 1: Australian Accounting Standards; and
- Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.
IFRS are incorporated into Tier 1 of Australian Accounting Standards, with the addition of paragraphs on the applicability of each Standard in the Australian environment.
Tier 2 comprises the recognition, measurement and presentation requirements of Tier 1 (which are also the recognition, measurement and presentation requirements of IFRS Standards) and substantially reduced disclosures corresponding to those requirements.
The following entities apply Tier 1 requirements in preparing general purpose financial statements:
- for-profit entities in the private sector that have public accountability (including pension funds); and
- the Australian Government and State, Territory and Local Governments.
The following entities may apply either Tier 2 or Tier 1 requirements in preparing general purpose financial statements:
- for-profit private sector entities that do not have public accountability;
- all not-for-profit private sector entities; and
- public sector entities other than the Australian Government and State, Territory and Local Governments
Private sector for-profit entities complying with Tier 1 of Australian Accounting Standards will simultaneously comply with IFRS Standards. Those entities are required to have an explicit statement in the statutory financial statements regarding compliance with IFRS Standards as issued by the Board.
March 2017 report on evaluation of IFRS Standards in Australia
In March 2017, the Australian Accounting Standards Board (AASB) published AASB Research Report No. 4, Review of Adoption of International Financial Reporting Standards in Australia. The report found:
- The IFRS Standards transition process has been reasonably smooth for most sectors.
- While IFRS Standards are currently an appropriate basis for AASB Standards developed for NFP entities, further modifications are needed to improve the quality and the cost-efficiency of financial reporting.
- One of the key benefits of adoption across all sectors is that it has enabled users and preparers to move between sectors, and between countries, with transferable knowledge and skills.
- Some entities, in particular those that operate in other countries that use IFRS Standards, have experienced cost savings in preparing financial reports. In contrast, some small and medium-sized entities (SMEs) and NFP entities have concerns regarding the costs of fully complying with AASB Standards, particularly the disclosure requirements.
EXTENT OF IFRS APPLICATION
For DOMESTIC companies whose debt or equity securities trade in a public market in the jurisdiction:
Yes.
IFRS Standards are required for all entities that meet the definition of a ‘reporting entity’ under Australian accounting standards. A reporting entity is ‘an entity in respect of which it is reasonable to expect the existence of users who rely on the entity's general purpose financial statement for information that will be useful to them for making and evaluating decisions about the allocation of resources. A reporting entity can be a single entity or a group comprising a parent and all of its subsidiaries.’
For FOREIGN companies whose debt or equity securities trade in a public market in the jurisdiction:
All.
IFRS ENDORSEMENT
Both the jurisdiction’s financial reporting standards (Australian Accounting Standards) and IFRS Standards.
Further, the basis of preparation note to the financial statements goes on to say that compliance with Australian Accounting Standards ensures that the financial statements also comply with IFRS Standards.
In June 2010, the Australian Parliament passed financial reporting reform legislation that requires an explicit statement of compliance with IFRS in the directors’ declaration accompanying the financial statements.The change was designed to counter a lack of awareness that the financial statements of Australian companies and other reporting entities comply with IFRS Standards.
No with respect to for-profit entities, except that Australia has not adopted IAS 26 Accounting and Reporting by Retirement Benefit Plans. Retirement benefit plans in Australia must apply IFRS Standards (except for IAS 26) and also apply Australian accounting standard AAS 25 Financial Reporting by Superannuation Plans. Modifications are made for not-for-profit entities. Additional guidance is provided in some standards for for-profit entities (eg AASB 6 equivalent to IFRS 6 Exploration for and Evaluation of Mineral Assets has additional guidance on ‘area of interest accounting” that is considered consistent with IFRS 6).
When Australia initially adopted IFRS as of 2005, the AASB made a number of changes to IFRS Standards, including elimination of accounting policy options. In 2007, the AASB approved an 'Amending Standard' that rescinded the changes that the AASB had made to IFRS Standards when it initially adopted them. Those amendments were effective 1 July 2007.
Australia has additional standards required for life and general insurers that are entirely consistent with IFRS 4 Insurance Contracts. Australia has added an additional standard on materiality (to be withdrawn).
Australia has additional interpretations including those on Australian Petroleum Resource Rent Tax, depreciation of long-lived physical assets, goods and services tax, substantive enactment of major tax bills in Australia (to be withdrawn), subscriber acquisition costs in the telecommunications industry, and tax consolidation accounting. Australia continues to have additional disclosure requirements specific to Australian legal requirements (eg dividends and prudential capital requirements).
