Recognition and measurement (AASB1_07-15_COMPdec20_07-21)

An entity shall prepare and present an opening Australian-Accounting-Standards statement of financial position at the date of transition to Australian Accounting Standards. This is the starting point for its accounting in accordance with Australian Accounting Standards.

An entity shall use the same accounting policies in its opening Australian-Accounting-Standards statement of financial position and throughout all periods presented in its first Australian-Accounting-Standards financial statements. Those accounting policies shall comply with each Australian Accounting Standard effective at the end of its first Australian-Accounting-Standards reporting period, except as specified in paragraphs 13–19 and Appendices B–E.

An entity shall not apply different versions of Australian Accounting Standards that were effective at earlier dates. An entity may apply a new Standard that is not yet mandatory if that Standard permits early application.

The transitional provisions in other Australian Accounting Standards apply to changes in accounting policies made by an entity that already uses Australian Accounting Standards; they do not apply to a first-time adopter’s transition to Australian Accounting Standards, except as specified in Appendices B–E.

Except as described in paragraphs 13–19 and Appendices B–E, an entity shall, in its opening Australian-Accounting-Standards statement of financial position:

(a) recognise all assets and liabilities whose recognition is required by Australian Accounting Standards;

(b) not recognise items as assets or liabilities if Australian Accounting Standards do not permit such recognition;

(c) reclassify items that it recognised in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Australian Accounting Standards; and

(d) apply Australian Accounting Standards in measuring all recognised assets and liabilities.

The accounting policies that an entity uses in its opening Australian-Accounting-Standards statement of financial position may differ from those that it used for the same date using its previous GAAP. The resulting adjustments arise from events and transactions before the date of transition to Australian Accounting Standards. Therefore, an entity shall recognise those adjustments directly in retained earnings (or, if appropriate, another category of equity) at the date of transition to Australian Accounting Standards.

This Standard establishes two categories of exceptions to the principle that an entity’s opening Australian-Accounting-Standards statement of financial position shall comply with each Australian Accounting Standard:

(a) paragraphs 14–17 and Appendix B prohibit retrospective application of some aspects of other Australian Accounting Standards.

(b) Appendices C–E grant exemptions from some requirements of other Australian Accounting Standards.

Entities that elect to apply AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities to periods beginning before 1 July 2021 (ie early application) may also elect to apply the short-term exemptions from restating comparative information set out in AASB 1053 Application of Tiers of Australian Accounting Standards Appendix E, where applicable. For entities that apply that relief, references to the ‘date of transition to Australian Accounting Standards’ in this Standard shall mean the beginning of the first Australian-Accounting-Standards reporting period.

This Standard prohibits retrospective application of some aspects of other Australian Accounting Standards. These exceptions are set out in paragraphs 14–17 and Appendix B.

An entity’s estimates in accordance with Australian Accounting Standards at the date of transition to Australian Accounting Standards shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

An entity may receive information after the date of transition to Australian Accounting Standards about estimates that it had made under previous GAAP. In accordance with paragraph 14, an entity shall treat the receipt of that information in the same way as non-adjusting events after the reporting period in accordance with AASB 110 Events after the Reporting Period. For example, assume that an entity’s date of transition to Australian Accounting Standards is 1 January 20X4 and new information on 15 July 20X4 requires the revision of an estimate made in accordance with previous GAAP at 31 December 20X3. The entity shall not reflect that new information in its opening Australian-Accounting-Standards statement of financial position (unless the estimates need adjustment for any differences in accounting policies or there is objective evidence that the estimates were in error). Instead, the entity shall reflect that new information in profit or loss (or, if appropriate, other comprehensive income) for the year ended 31 December 20X4.

An entity may need to make estimates in accordance with Australian Accounting Standards at the date of transition to Australian Accounting Standards that were not required at that date under previous GAAP. To achieve consistency with AASB 110, those estimates in accordance with Australian Accounting Standards shall reflect conditions that existed at the date of transition to Australian Accounting Standards. In particular, estimates at the date of transition to Australian Accounting Standards of market prices, interest rates or foreign exchange rates shall reflect market conditions at that date.

Paragraphs 14–16 apply to the opening Australian-Accounting-Standards statement of financial position. They also apply to a comparative period presented in an entity’s first Australian-Accounting-Standards financial statements, in which case the references to the date of transition to Australian Accounting Standards are replaced by references to the end of that comparative period.

An entity may elect to use one or more of the exemptions contained in Appendices C–E. An entity shall not apply these exemptions by analogy to other items.

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