Will ASIC give relief from compliance with IFRS requirements?
No. We will be unlikely to provide relief from compliance with the requirements of IFRS. The decision by the FRC for Australia to adopt IFRS is part of a strategy to ensure consistency and comparability of Australian financial reporting with financial reporting across the global financial markets.
Providing relief from the requirements of IFRS would not be consistent with the aims of this convergence process.
Will ASIC grant an extension of time to comply with IFRS requirements?
No. We will be unlikely to extend the time for an entity to comply with the new requirements because the implementation date has been set by the Financial Reporting Council and the AASB. Many reporting requirements will not change because the existing accounting standards already reflect the requirements of the proposed IFRS, and the timetable set down for adoption of the IFRS requirements was considered to provide sufficient time for entities to plan for and comply with the new requirements.
Has there been a contravention of s254T of the Act if a dividend has been paid from a reported profit, if the reported profit becomes a loss when restated for comparative purposes on adoption of the IFRS requirements?
No, s254T has not been contravened if the reported profit for a financial period subsequently becomes a loss when the financial statements for the entity for that period are restated for comparative purposes on adoption of IFRS.
Section 254T of the Corporations Act 2001 (Act) states that 'a dividend may only be paid out of profits of the company'. If an entity fully complied with all accounting standards and other reporting requirements in a particular reporting period and reported a profit for that period, all or part of this profit is available to be paid out as a dividend under s254T of the Act, subject to s588G and ongoing directors' responsibilities.
Can a dividend be paid from profit that is reversed out of one financial year on adoption of IFRS requirements, and brought to account in a subsequent year?
Yes, a dividend can be paid in respect to profit from income brought to account a second time due to adoption of IFRS but only to the extent that no dividend has been paid from that profit previously. A dividend cannot be paid from the same profit more than once, or there will be a contravention of s254T.
If non reporting entities provide comparative figures for the previous financial year, do these figures need to be in accordance with IFRS requirements?
Yes, if non reporting entities provide comparative figures for the previous financial year on adoption of IFRS, the comparative figures must be restated and presented in accordance with the IFRS requirements.
Non reporting entities must use the basis for recognition and measurement set out in the accounting standards in preparation of their financial reports (refer to ASIC Information Release 00/025). The standards will require that comparative figures be restated and presented in accordance with the IFRS requirements.
What would be the impact on paying dividends of reporting in a foreign currency?
If a company presents its financial report for a year commencing on or after 1 January 2005 in a foreign currency, its foreign currency profits will be the profits from which a dividend can be paid.
Companies will need to carefully consider the implications of paying a dividend in Australian dollars from a foreign currency profit. If there are changes in exchange rates between fixing a dividend and the payment date, the dividend could exceed the profits and paying the full dividend may contravene s254T of the Corporations Act.
Companies reporting in a foreign currency might be able to change their constitutions to allow payment of dividends in a foreign currency but this may not meet the needs of shareholders. Alternatively, such companies may need to ensure that there is nothing in their constitutions providing for the declaration of dividends and making a declared dividend a debt (s254V(2)). The company may then be able to fix a date for an Australian dollar dividend payment, and tell shareholders that the dividend may be reduced if exchange rates move unfavourably before that date.
