Generally all new Accounting Standards contain provisions that permit adoption of the requirements in a period prior to the mandatory application date at the option of the entity.

In some cases entities will see great benefit in early adopting the new or revised standard; however this is not always the case.

Whether or not an entity elects to early adopt care should be taken to ensure that the appropriate disclosures are made in the financial statements.

Disclosures are also required where an entity applies a newly effective accounting standard for the first time.

Disclosure on early adoption or initial application

Where an entity chooses to early adopt an accounting standard or in the first period a new standard becomes effective, the entity shall make the following disclosures in accordance with AASB 108.28:

(a)the title of the Australian Accounting Standard;
(b)when applicable, that the change in accounting policy is made in accordance with its transitional provisions;
(c)the nature of the change in accounting policy;
(d)when applicable, a description of the transitional provisions;
(e)when applicable, the transitional provisions that might have an effect on future periods;
(f)for the current period and each prior period presented, to the extent practicable, the amount of the adjustment:
      (i)for each financial statement line item affected; and
      (ii)if AASB 133 Earnings per Share applies to the entity, for basic and diluted earnings per share;
(g)the amount of the adjustment relating to periods before those presented, to the extent practicable; and
(h)if retrospective application resulting from the initial application of a standard (in accordance with the transitional provisions of the standard) is impracticable for a particular prior period, or for periods before those presented, the circumstances that led to the existence of that condition and a description of how and from when the change in accounting policy has been applied.

Financial statements of subsequent periods need not repeat these disclosures.

Entities reporting under the Corporations Act 2001 should also ensure that where an election is made to early adopt an accounting standard it is made in writing by the directors in order to comply with s334(5) of the Act.

No early adoption

Where an entity chooses not to early adopt a standard that is issued but not yet effective they must comply with AASB 108.30 and disclose:

(a)this fact; and
(b)known or reasonably estimable information relevant to assessing the possible impact that application of the new Australian Accounting Standard will have on the entity’s financial statements in the period of initial application.

In order to comply with the above the entity should consider disclosing:

(a)the title of the new Australian Accounting Standard;
(b)the nature of the impending change or changes in accounting policy;
(c)the date by which application of the Australian Accounting Standard is required;
(d)the date as at which it plans to apply the Australian Accounting Standard initially; and either:
      (i)a discussion of the impact that initial application of the Australian Accounting Standard is expected to have on the entity’s financial statements; or
      (ii)if that impact is not known or reasonably estimable, a statement to that effect.

The disclosures required by AASB 108.28 and AASB 108.30 also apply to Australian Accounting Interpretations.