Comment: Australia’s Adoption of IFRSs–A Clarification
from the AASB
I n previous issues of the Australian Accounting
Review (from issue 4, volume 18, no. 47, December
2008, to issue 1, volume 19, no. 48, March 2009),
Nobes responded to Haswell and Langfield-Smith in ‘57
Varieties of Serious Defect in IFRS?’ The purpose of these
comments is not to engage in the debate that is the focus
of the Nobes response, but rather to clarify an aspect of
the background to the debate.
In the early paragraphs of his response, Nobes states
that ‘Australia has chosen not to ‘adopt’ IFRS, but to
converge its standards with IFRS’. I can understand how
this misconception might have been formed, but would
like to emphasise that, consistent with the Australian
Financial Reporting Council’s 2002 strategic direction
to the AASB regarding International Financial Reporting
Standards (IFRSs), Australia definitely adopts IFRSs.
The AASB undertakes a process to include IFRSs into
Australian law, which includes tabling the Standards
in the Australian Parliament. I understand that similar
functions are performed in other jurisdictions, such as
through the ‘endorsement process’ that occurs in the
European Union. The Australian Corporations Act 2001
refers to compliance with ‘accounting standards’, and
the AASB’s enabling legislation presumes that the AASB
makes these standards. The absence of a direct reference
to IFRSs in the law may be the source of the comment that
Australia does not adopt IFRSs. Although this absence of
a direct reference to IFRSs perhaps reflects the Australian
Parliament’s desire to retain sovereign powers over law
making, it has not been an impediment to adopting
IFRSs in Australia to date.
The AASB’s accounting standards that adopt IFRSs
have the same subject titles as the IFRSs, but slightly
different labelling – for example, IFRS 3 Business
Combinations is AASB 3 Business Combinations, and
IAS 23 Borrowing Costs is AASB 123 Borrowing Costs.
Australian Accounting Standards that adopt IFRSs
are word for word the same as IFRSs in terms of
their technical requirements and mandatory application
dates, except for the slightly different labels and cross-
references to them. There are also additional references
Australian Accounting Review No. 49 Vol. 19 Issue 2 2009
in the application paragraphs needed to ensure they are
mandatory in respect of certain Australian entities.
Another possible reason for a perception that Australia
has not adopted IFRSs is that, to the extent feasible, the
AASB applies the IFRSs to all types of reporting entities,
whether for-profit or not-for-profit. Accordingly, there
are some limited departures from IFRS in respect
of not-for-profit entities because, understandably, the
International Accounting Standards Board (IASB) may
not have catered for them in their deliberations. Those
paragraphs relating only to not-for-profit entities are
clearly presented as such in the relevant standards.
The AASB also issues accounting standards in addition
to those adopting IFRSs to meet specific domestic needs.
By way of example, there is AASB 1004 Contributions,
which applies to not-for-profit entities, and AASB 1049
Whole of Government and General Government Sector
Financial Reporting, which applies to certain not-for-
profit public sector entities.
In order to describe the subset of Australian
Accounting Standards that are the adopted IFRS, the
AASB coined the term ‘Australian equivalents to IFRSs’.
This may also give the impression that they are not
the same as the IFRSs, particularly since some other
jurisdictions that are not IFRS adopters employ similar
terminology.
Accordingly, while I can understand how a miscon-
ception may have been created that Australia is not an
IFRS adopter, the key message I wish to communicate is
that Australia has adopted IFRSs, and for-profit entities
in Australia that comply with Australian Accounting
Standards are also complying with IFRSs. As required
by paragraph 16 of IAS 1 Presentation of Financial
Statements, paragraph 16 of AASB 101 Presentation of
Financial Statements requires an entity whose financial
statements comply with IFRSs to make an explicit and
unreserved statement of such compliance.
Angus Thomson
Australian Accounting Standards Board (AASB)
Technical Director
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