This checklist covers some key questions you should consider.
Are you ready?
Accounting standard AASB 9 Financial Instruments has started. It started 1 January 2018 if you have a December year end and started 1 July 2018 if you have a June year end.
Not all of the previous standard has been changed. The major changes relate to:
There were also some changes to liabilities measured at fair value through profit or loss (P&L) relating to own credit risk, but these are rarely applicable in the public sector.
The following remain largely unchanged:
The good news is that you will usually not have to restate comparative figures. However, balances at the commencement of the standard (for example, at 1 July 2018) will need to be restated using the new measurement rules, including impairment. The transitional provisions can be complicated to apply.
Hedging activities, often with the use of derivatives, can be complex; consequently, so is the accounting. The new hedging requirements are simpler, including the removal of the dreaded 80/125 prospective and retrospective effectiveness testing. The changes have implications for those entities not currently using hedge accounting, and would like to, and for those entities currently using hedge accounting.
Financial instrument disclosures have been expanded. These are included in the revised AASB 7 Financial Instruments: Disclosures. We encourage you to prepare draft disclosures under the new standards, tailored for your entity using focused financial reporting, well before next year’s pro-forma financial statement deadlines.
The disclosures need to be prepared and applied in the context of your operations, using focused financial reporting principles to reduce the clutter and unnecessary disclosures.