{"id":"F2023L01377","name":"Accounting Standard AASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability","slug":"accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":104885,"registerId":"commonwealth-F2023L01377-current","compilationNumber":null,"startDate":"2026-04-03","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Obtaining a copy of this Accounting Stan","sectionType":"part","heading":"Obtaining a copy of this Accounting Standard","content":"# Obtaining a copy of this Accounting Standard\n\nThis Standard is available on the AASB website: www.aasb.gov.au.\n\nAustralian Accounting Standards Board\n\nPO Box 204\n\nCollins Street West\n\nVictoria 8007\n\nAUSTRALIA\n\nPhone: (03) 9617 7600\n\nE-mail: standard@aasb.gov.au\n\nWebsite: www.aasb.gov.au","sortOrder":0},{"sectionNumber":"Other enquiries","sectionType":"part","heading":"Other enquiries","content":"# Other enquiries\n\nPhone: (03) 9617 7600\n\nE-mail: standard@aasb.gov.au\n\nCOPYRIGHT\n\n© Commonwealth of Australia 2023\n\nThis AASB Standard contains IFRS Foundation copyright material. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use subject to the inclusion of an acknowledgment of the source. Requests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to The Managing Director, Australian Accounting Standards Board, PO Box 204, Collins Street West, Victoria 8007.\n\nAll existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only. Further information and requests for authorisation to reproduce for commercial purposes outside Australia should be addressed to the IFRS Foundation at www.ifrs.org.\n\nISSN 1036-4803","sortOrder":1},{"sectionNumber":"Contents","sectionType":"part","heading":"Contents","content":"# Contents\n\nPreface\n\nAccounting Standard\n\nAASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability\n\nfrom page\n\nObjective 5\n\nApplication 5\n\nAmendments to AASB 1 5\n\nAmendments to AASB 121 6\n\nAmendments to AASB 1060 12\n\nCOMMENCEMENT OF THE LEGISLATIVE INSTRUMENT 12\n\naVailable on the AASB website\n\nIllustrative examples for IAS 21\n\nIASB Bases for Conclusions – Amendments\n\nAustralian Accounting Standard AASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability is set out on pages 5–12. All the paragraphs have equal authority.","sortOrder":2},{"sectionNumber":"Preface","sectionType":"part","heading":"Preface","content":"# Preface\n\n## Standards amended by AASB 2023-5\n\nThis Standard makes amendments to AASB 1 First-time Adoption of Australian Accounting Standards (July 2015), AASB 121 The Effects of Changes in Foreign Exchange Rates (August 2015) and AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-For-Profit Tier 2 Entities (March 2020).\n\nThese amendments arise from the issuance of International Financial Reporting Standard Lack of Exchangeability (Amendments to IAS 21) by the International Accounting Standards Board (IASB) in August 2023.\n\n## Main features of this Standard\n\nMain requirements\n\nThis Standard amends AASB 121 and AASB 1 to improve the usefulness of information provided to users of financial statements. The amendments require entities to apply a consistent approach to determining whether a currency is exchangeable into another currency and the spot exchange rate to use when it is not exchangeable.\n\nThe Standard also amends AASB 121 to extend the exemption from complying with the disclosure requirements of AASB 121 for entities that apply AASB 1060 to ensure Tier 2 entities are not required to comply with the new disclosure requirements in AASB 121 when preparing their Tier 2 financial statements.\n\nApplication date\n\nThis Standard applies to annual periods beginning on or after 1 January 2025. Earlier application is permitted for annual periods beginning before 1 January 2025.","sortOrder":3},{"sectionNumber":"Standards amended by AASB 2023-5","sectionType":"part","heading":"Standards amended by AASB 2023-5","content":"## Standards amended by AASB 2023-5\n\nThis Standard makes amendments to AASB 1 First-time Adoption of Australian Accounting Standards (July 2015), AASB 121 The Effects of Changes in Foreign Exchange Rates (August 2015) and AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-For-Profit Tier 2 Entities (March 2020).\n\nThese amendments arise from the issuance of International Financial Reporting Standard Lack of Exchangeability (Amendments to IAS 21) by the International Accounting Standards Board (IASB) in August 2023.","sortOrder":4},{"sectionNumber":"Main features of this Standard","sectionType":"part","heading":"Main features of this Standard","content":"## Main features of this Standard\n\nMain requirements\n\nThis Standard amends AASB 121 and AASB 1 to improve the usefulness of information provided to users of financial statements. The amendments require entities to apply a consistent approach to determining whether a currency is exchangeable into another currency and the spot exchange rate to use when it is not exchangeable.\n\nThe Standard also amends AASB 121 to extend the exemption from complying with the disclosure requirements of AASB 121 for entities that apply AASB 1060 to ensure Tier 2 entities are not required to comply with the new disclosure requirements in AASB 121 when preparing their Tier 2 financial statements.\n\nApplication date\n\nThis Standard applies to annual periods beginning on or after 1 January 2025. Earlier application is permitted for annual periods beginning before 1 January 2025.","sortOrder":5},{"sectionNumber":"Accounting Standard AASB 2023-5","sectionType":"part","heading":"Accounting Standard AASB 2023-5","content":"# Accounting Standard AASB 2023-5\n\nThe Australian Accounting Standards Board makes Accounting Standard AASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability under section 334 of the Corporations Act 2001.\n\n|                      | Keith Kendall |\n| -------------------- | ------------- |\n| Dated 9 October 2023 | Chair – AASB  |","sortOrder":6},{"sectionNumber":"Objective","sectionType":"part","heading":"Objective","content":"## Objective\n\nThis Standard amends:\n\n(a) AASB 1 First-time Adoption of Australian Accounting Standards (July 2015);\n\n(b) AASB 121 The Effects of Changes in Foreign Exchange Rates (August 2015); and\n\n(c) AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-For-Profit Tier 2 Entities (March 2020);\n\nas a consequence of the issuance of International Financial Reporting Standard Lack of Exchangeability (Amendments to IAS 21) by the International Accounting Standards Board (IASB) in August 2023.","sortOrder":8},{"sectionNumber":"Application","sectionType":"part","heading":"Application","content":"## Application\n\nThe amendments set out in this Standard apply to entities and financial statements in accordance with the application of the other Standards set out in AASB 1057 Application of Australian Accounting Standards.\n\nThis Standard applies to annual periods beginning on or after 1 January 2025.\n\nThis Standard may be applied to annual periods beginning before 1 January 2025. When an entity applies this Standard to such an annual period, it shall disclose that fact.\n\nThis Standard uses underlining, striking out and other typographical material to identify some of the amendments to a Standard, in order to make the amendments more understandable. However, the amendments made by this Standard do not include that underlining, striking out or other typographical material. Ellipses (…) are used to help provide the context within which amendments are made and also to indicate text that is not amended.","sortOrder":9},{"sectionNumber":"Amendments to AASB 1","sectionType":"part","heading":"Amendments to AASB 1","content":"## Amendments to AASB 1\n\n| Paragraphs 31C and D27 are amended and paragraph 39AI is added. New text is underlined and deleted text is struck through. |\n| -------------------------------------------------------------------------------------------------------------------------- |\n\nPresentation and disclosure\n\n    ...\n\nExplanation of transition to Australian Accounting Standards\n\n    ...\n\nUse of deemed cost after severe hyperinflation\n\n    31C If an entity elects to measure assets and liabilities at fair value and to use that fair value as the deemed cost in its opening Australian-Accounting-Standards statement of financial position because of severe hyperinflation (see paragraphs D26–D30), the entity’s first Australian-Accounting-Standards financial statements shall disclose an explanation of how, and why, the entity had, and then ceased to have, a functional currency that is subject to severe hyperinflation. has both of the following characteristics:\n    (a) a reliable general price index is not available to all entities with transactions and balances in the currency.\n    (b) exchangeability between the currency and a relatively stable foreign currency does not exist.\n    ...\n\nEffective date\n\n    ...\n    39AI AASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability, issued in October 2023, amended paragraphs 31C and D27. An entity shall apply those amendments when it applies AASB 121 The Effects of Changes in Foreign Exchange Rates (as amended in October 2023).\n    ...\n\nAppendix D  \nExemptions from other Australian Accounting Standards\n\n    ...\n\nSevere hyperinflation\n\n    ...\n    D27 The currency of a hyperinflationary economy is subject to severe hyperinflation if it has both of the following characteristics:\n    (a) a reliable general price index is not available to all entities with transactions and balances in the currency.\n    (b) exchangeability between the currency is not exchangeable into and a relatively stable foreign currency does not exist. Exchangeability is assessed in accordance with AASB 121.","sortOrder":10},{"sectionNumber":"Amendments to AASB 121","sectionType":"part","heading":"Amendments to AASB 121","content":"## Amendments to AASB 121\n\n| Paragraphs 8 and 26 are amended. Paragraphs 8A–8B and 19A and their related headings, paragraphs 57A–57B and 60L–60M and Appendix A are added. New text is underlined and deleted text is struck through. For ease of reading, text in Appendix A has not been underlined.Following the IASB’s addition of Appendix A to IAS 21, Appendix A Australian simplified disclosures for Tier 2 entities to AASB 121 is relabelled as Appendix B. The Appendix is also amended. New text is underlined. |\n| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |\n\nDefinitions\n\n    8 The following terms are used in this Standard with the meanings specified:\n    ...\n    A currency is exchangeable into another currency when an entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations.\n    ...\n\nElaboration on the definitions\n\nExchangeable (paragraphs A2–A10)\n\n    8A An entity assesses whether a currency is exchangeable into another currency:\n    (a) at a measurement date; and\n    (b) for a specified purpose.\n    8B If an entity is able to obtain no more than an insignificant amount of the other currency at the measurement date for the specified purpose, the currency is not exchangeable into the other currency.\n    ...\n\nEstimating the spot exchange rate when a currency is not exchangeable (paragraphs A11–A17)\n\n    19A An entity shall estimate the spot exchange rate at a measurement date when a currency is not exchangeable into another currency (as described in paragraphs 8, 8A–8B and A2–A10) at that date. An entity’s objective in estimating the spot exchange rate is to reflect the rate at which an orderly exchange transaction would take place at the measurement date between market participants under prevailing economic conditions.\n\nReporting foreign currency transactions in the functional currency\n\n    ...\n\nReporting at the ends of subsequent reporting periods\n\n    ...\n    26 When several exchange rates are available, the rate used is that at which the future cash flows represented by the transaction or balance could have been settled if those cash flows had occurred at the measurement date. If exchangeability between two currencies is temporarily lacking, the rate used is the first subsequent rate at which exchanges could be made.\n    ...\n\nDisclosure\n\n    ...\n    57A When an entity estimates a spot exchange rate because a currency is not exchangeable into another currency (see paragraph 19A), the entity shall disclose information that enables users of its financial statements to understand how the currency not being exchangeable into the other currency affects, or is expected to affect, the entity’s financial performance, financial position and cash flows. To achieve this objective, an entity shall disclose information about:\n    (a) the nature and financial effects of the currency not being exchangeable into the other currency;\n    (b) the spot exchange rate(s) used;\n    (c) the estimation process; and\n    (d) the risks to which the entity is exposed because of the currency not being exchangeable into the other currency.\n    57B Paragraphs A18–A20 specify how an entity applies paragraph 57A.\n\nEffective date and transition\n\n    ...\n    60L AASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability, issued in October 2023, amended paragraphs 8 and 26, added paragraphs 8A–8B, 19A, 57A–57B and Appendix A, relabelled the original Appendix A as Appendix B and amended it. An entity shall apply those amendments for annual reporting periods beginning on or after 1 January 2025. Earlier application is permitted. If an entity applies the amendments for an earlier period, it shall disclose that fact. The date of initial application is the beginning of the annual reporting period in which an entity first applies those amendments.\n    60M In applying AASB 2023-5, an entity shall not restate comparative information. Instead:\n    (a) when the entity reports foreign currency transactions in its functional currency, and, at the date of initial application, concludes that its functional currency is not exchangeable into the foreign currency or, if applicable, concludes that the foreign currency is not exchangeable into its functional currency, the entity shall, at the date of initial application:\n    (i) translate affected foreign currency monetary items, and non-monetary items measured at fair value in a foreign currency, using the estimated spot exchange rate at that date; and\n    (ii) recognise any effect of initially applying the amendments as an adjustment to the opening balance of retained earnings.\n    (b) when the entity uses a presentation currency other than its functional currency, or translates the results and financial position of a foreign operation, and, at the date of initial application, concludes that its functional currency (or the foreign operation’s functional currency) is not exchangeable into its presentation currency or, if applicable, concludes that its presentation currency is not exchangeable into its functional currency (or the foreign operation’s functional currency), the entity shall, at the date of initial application:\n    (i) translate affected assets and liabilities using the estimated spot exchange rate at that date;\n    (ii) translate affected equity items using the estimated spot exchange rate at that date if the entity’s functional currency is hyperinflationary; and\n    (iii) recognise any effect of initially applying the amendments as an adjustment to the cumulative amount of translation differences - accumulated in a separate component of equity.\n    ...\n\nAppendix A  \nApplication guidance\n\nThis appendix is an integral part of the Standard.\n\nExchangeability\n\n    A1 The purpose of the following diagram is to help entities assess whether a currency is exchangeable and estimate the spot exchange rate when a currency is not exchangeable.\n\n![Diagram to help entities assess whether a currency is exchangeable and estimate the spot exchange rate when a currency is not exchangeable.](image.001.png)\n\nStep I: Assessing whether a currency is exchangeable (paragraphs 8 and 8A–8B)\n\n    A2 Paragraphs A3–A10 set out application guidance to help an entity assess whether a currency is exchangeable into another currency. An entity might determine that a currency is not exchangeable into another currency, even though that other currency might be exchangeable in the other direction. For example, an entity might determine that currency PC is not exchangeable into currency LC, even though currency LC is exchangeable into currency PC.\n\nTime frame\n\n    A3 Paragraph 8 defines a spot exchange rate as the exchange rate for immediate delivery. However, an exchange transaction might not always complete instantaneously because of legal or regulatory requirements, or for practical reasons such as public holidays. A normal administrative delay in obtaining the other currency does not preclude a currency from being exchangeable into that other currency. What constitutes a normal administrative delay depends on facts and circumstances.\n\nAbility to obtain the other currency\n\n    A4 In assessing whether a currency is exchangeable into another currency, an entity shall consider its ability to obtain the other currency, rather than its intention or decision to do so. Subject to the other requirements in paragraphs A2–A10, a currency is exchangeable into another currency if an entity is able to obtain the other currency – either directly or indirectly – even if it intends or decides not to do so. For example, subject to the other requirements in paragraphs A2–A10, regardless of whether the entity intends or decides to obtain PC, currency LC is exchangeable into currency PC if an entity is able to either exchange LC for PC, or exchange LC for another currency (FC) and then exchange FC for PC.\n\nMarkets or exchange mechanisms\n\n    A5 In assessing whether a currency is exchangeable into another currency, an entity shall consider only markets or exchange mechanisms in which a transaction to exchange the currency for the other currency would create enforceable rights and obligations. Enforceability is a matter of law. Whether an exchange transaction in a market or exchange mechanism would create enforceable rights and obligations depends on facts and circumstances.\n\nPurpose of obtaining the other currency\n\n    A6 Different exchange rates might be available for different uses of a currency. For example, a jurisdiction facing pressure on its balance of payments might wish to deter capital remittances (such as dividend payments) to other jurisdictions but encourage imports of specific goods from those jurisdictions. In such circumstances, the relevant authorities might:\n    (a) set a preferential exchange rate for imports of those goods and a ‘penalty’ exchange rate for capital remittances to other jurisdictions, thus resulting in different exchange rates applying to different exchange transactions; or\n    (b) make the other currency available only to pay for imports of those goods and not for capital remittances to other jurisdictions.\n    A7 Accordingly, whether a currency is exchangeable into another currency could depend on the purpose for which the entity obtains (or hypothetically might need to obtain) the other currency. In assessing exchangeability:\n    (a) when an entity reports foreign currency transactions in its functional currency (see paragraphs 20–37), the entity shall assume its purpose in obtaining the other currency is to realise or settle individual foreign currency transactions, assets or liabilities.\n    (b) when an entity uses a presentation currency other than its functional currency (see paragraphs 38–43), the entity shall assume its purpose in obtaining the other currency is to realise or settle its net assets or net liabilities.\n    (c) when an entity translates the results and financial position of a foreign operation into the presentation currency (see paragraphs 44–47), the entity shall assume its purpose in obtaining the other currency is to realise or settle its net investment in the foreign operation.\n    A8 An entity’s net assets or net investment in a foreign operation might be realised by, for example:\n    (a) the distribution of a financial return to the entity’s owners;\n    (b) the receipt of a financial return from the entity’s foreign operation; or\n    (c) the recovery of the investment by the entity or the entity’s owners, such as through disposal of the investment.\n    A9 An entity shall assess whether a currency is exchangeable into another currency separately for each purpose specified in paragraph A7. For example, an entity shall assess exchangeability for the purpose of reporting foreign currency transactions in its functional currency (see paragraph A7(a)) separately from exchangeability for the purpose of translating the results and financial position of a foreign operation (see paragraph A7(c)).\n\nAbility to obtain only limited amounts of the other currency\n\n    A10 A currency is not exchangeable into another currency if, for a purpose specified in paragraph A7, an entity is able to obtain no more than an insignificant amount of the other currency. An entity shall assess the significance of the amount of the other currency it is able to obtain for a specified purpose by comparing that amount with the total amount of the other currency required for that purpose. For example, an entity with a functional currency of LC has liabilities denominated in currency FC. The entity assesses whether the total amount of FC it can obtain for the purpose of settling those liabilities is no more than an insignificant amount compared with the aggregated amount (the sum) of its liability balances denominated in FC.\n\nStep II: Estimating the spot exchange rate when a currency is not exchangeable (paragraph 19A)\n\n    A11 This Standard does not specify how an entity estimates the spot exchange rate to meet the objective in paragraph 19A. An entity can use an observable exchange rate without adjustment (see paragraphs A12–A16) or another estimation technique (see paragraph A17).\n\nUsing an observable exchange rate without adjustment\n\n    A12 In estimating the spot exchange rate as required by paragraph 19A, an entity may use an observable exchange rate without adjustment if that observable exchange rate meets the objective in paragraph 19A. Examples of an observable exchange rate include:\n    (a) a spot exchange rate for a purpose other than that for which an entity assesses exchangeability (see paragraphs A13–A14); and\n    (b) the first exchange rate at which an entity is able to obtain the other currency for the specified purpose after exchangeability of the currency is restored (first subsequent exchange rate) (see paragraphs A15–A16).\n\nUsing an observable exchange rate for another purpose\n\n    A13 A currency that is not exchangeable into another currency for one purpose might be exchangeable into that currency for another purpose. For example, an entity might be able to obtain a currency to import specific goods but not to pay dividends. In such situations, the entity might conclude that an observable exchange rate for another purpose meets the objective in paragraph 19A. If the rate meets the objective in paragraph 19A, an entity may use that rate as the estimated spot exchange rate.\n    A14 In assessing whether such an observable exchange rate meets the objective in paragraph 19A, an entity shall consider, among other factors:\n    (a) whether several observable exchange rates exist – the existence of more than one observable exchange rate might indicate that exchange rates are set to encourage, or deter, entities from obtaining the other currency for particular purposes. These observable exchange rates might include an ‘incentive’ or ‘penalty’ and therefore might not reflect the prevailing economic conditions.\n    (b) the purpose for which the currency is exchangeable – if an entity is able to obtain the other currency only for limited purposes (such as to import emergency supplies), the observable exchange rate might not reflect the prevailing economic conditions.\n    (c) the nature of the exchange rate – a free-floating observable exchange rate is more likely to reflect the prevailing economic conditions than an exchange rate set through regular interventions by the relevant authorities.\n    (d) the frequency with which exchange rates are updated – an observable exchange rate unchanged over time is less likely to reflect the prevailing economic conditions than an observable exchange rate that is updated on a daily basis (or even more frequently).\n\nUsing the first subsequent exchange rate\n\n    A15 A currency that is not exchangeable into another currency at the measurement date for a specified purpose might subsequently become exchangeable into that currency for that purpose. In such situations, an entity might conclude that the first subsequent exchange rate meets the objective in paragraph 19A. If the rate meets the objective in paragraph 19A, an entity may use that rate as the estimated spot exchange rate.\n    A16 In assessing whether the first subsequent exchange rate meets the objective in paragraph 19A, an entity shall consider, among other factors:\n    (a) the time between the measurement date and the date at which exchangeability is restored – the shorter this period, the more likely the first subsequent exchange rate will reflect the prevailing economic conditions.\n    (b) inflation rates – when an economy is subject to high inflation, including when an economy is hyperinflationary (as specified in AASB 129 Financial Reporting in Hyperinflationary Economies), prices often change quickly, perhaps several times a day. Accordingly, the first subsequent exchange rate for a currency of such an economy might not reflect the prevailing economic conditions.\n\nUsing another estimation technique\n\n    A17 An entity using another estimation technique may use any observable exchange rate – including rates from exchange transactions in markets or exchange mechanisms that do not create enforceable rights and obligations – and adjust that rate, as necessary, to meet the objective in paragraph 19A.\n\nDisclosure when a currency is not exchangeable\n\n    A18 An entity shall consider how much detail is necessary to satisfy the disclosure objective in paragraph 57A. An entity shall disclose the information specified in paragraphs A19–A20 and any additional information necessary to meet the disclosure objective in paragraph 57A.\n    A19 In applying paragraph 57A, an entity shall disclose:\n    (a) the currency and a description of the restrictions that result in that currency not being exchangeable into the other currency;\n    (b) a description of affected transactions;\n    (c) the carrying amount of affected assets and liabilities;\n    (d) the spot exchange rates used and whether those rates are:\n    (i) observable exchange rates without adjustment (see paragraphs A12–A16); or\n    (ii) spot exchange rates estimated using another estimation technique (see paragraph A17);\n    (e) a description of any estimation technique the entity has used, and qualitative and quantitative information about the inputs and assumptions used in that estimation technique; and\n    (f) qualitative information about each type of risk to which the entity is exposed because the currency is not exchangeable into the other currency, and the nature and carrying amount of assets and liabilities exposed to each type of risk.\n    A20 When a foreign operation’s functional currency is not exchangeable into the presentation currency or, if applicable, the presentation currency is not exchangeable into a foreign operation’s functional currency, an entity shall also disclose:\n    (a) the name of the foreign operation; whether the foreign operation is a subsidiary, joint operation, joint venture, associate or branch; and its principal place of business;\n    (b) summarised financial information about the foreign operation; and\n    (c) the nature and terms of any contractual arrangements that could require the entity to provide financial support to the foreign operation, including events or circumstances that could expose the entity to a loss.\n\nAppendix A B  \nAustralian simplified disclosures for Tier 2 entities\n\n    This appendix is an integral part of the Standard.\n\nAusAB1 Paragraphs 51–57B do not apply to entities preparing general purpose financial statements that apply AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.","sortOrder":11},{"sectionNumber":"Amendments to AASB 1060","sectionType":"part","heading":"Amendments to AASB 1060","content":"## Amendments to AASB 1060\n\n| The table in paragraph IG1 in the implementation guidance accompanying AASB 1060 is amended. New text is underlined. |\n| -------------------------------------------------------------------------------------------------------------------- |\n\nImplementation guidance\n\n…\n\n| AASB Standard                                             | Paragraphs superseded by this Standard | Paragraphs that have not been superseded by this Standard and represent presentation requirements or associated guidance |\n| --------------------------------------------------------- | -------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ |\n| …                                                         | …                                      | …                                                                                                                        |\n| AASB 121 The Effects of Changes in Foreign Exchange Rates | Paragraphs 51–57B                      | none                                                                                                                     |\n| …                                                         | …                                      | …                                                                                                                        |","sortOrder":12},{"sectionNumber":"Commencement of the legislative instrume","sectionType":"part","heading":"Commencement of the legislative instrument","content":"## Commencement of the legislative instrument\n\nFor legal purposes, this legislative instrument commences on 31 December 2024.","sortOrder":13}],"analysis":{"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":false,"description":"This instrument is a targeted technical amendment to align Australian standards with the IASB’s Lack of Exchangeability amendments. It changes measurement, disclosure and transition mechanics within the existing remit of AASB 121/AASB 1/AASB 1060 but does not broaden the classes of entities or financial statements subject to Australian Accounting Standards. The amendment does modify the mechanics for assessing severe hyperinflation (by adding exchangeability as a characteristic) and adds new disclosure and estimation duties, but these are technical refinements within the original scope rather than an expansion of scope to new types of transactions or entities."},"complexity_factors":["Adds new definition of exchangeability and application guidance (paras 8, 8A–8B, Appendix A A1–A20).","Introduces a new measurement requirement to estimate a spot rate when currency not exchangeable (para 19A) with multiple acceptable estimation techniques (paras A11–A17).","New disclosure requirements with detailed subitems (paras 57A–57B and A19–A20).","Transition mechanics that prohibit restatement of comparatives and require opening-balance adjustments (paras 60L–60M; AASB 1 para 39AI).","Cross-references to multiple other AASBs and IFRS material (AASB 1, AASB 1060, AASB 129, AASB 1057 and IASB material).","Tiered application/exemption for Tier 2 entities (AusAB1 / AASB 1060 changes).","Judgement-heavy assessments (e.g. enforceability of rights, purpose-specific exchangeability, significance thresholds) increasing interpretative complexity (Appendix A paras A4–A10).","Relabels and amends appendices (original Appendix A relabelled as Appendix B), adding to navigation complexity.","Multiple small amendments across three standards (AASB 1, AASB 121, AASB 1060) rather than a single consolidated change.","Implementation timing nuance: legal commencement date (31 Dec 2024), effective for periods from 1 Jan 2025, earlier application permitted (paras 60L and Commencement)."],"plain_english_summary":"**What this instrument does (mechanically)**\n\n- Amends three Australian accounting standards — AASB 121 (foreign exchange), AASB 1 (first-time adoption), and AASB 1060 (Tier 2 simplified disclosures) — to adopt the IASB’s Lack of Exchangeability amendments. (See AASB 2023-5 Objective and Preface.)\n- Adds a formal definition and assessment process for when one currency is \"exchangeable\" into another (new definition and paras 8, 8A–8B and Appendix A).\n- Requires entities to estimate a spot exchange rate when a currency is not exchangeable and to use that estimated rate for measuring/ translating affected monetary items and items measured in a foreign currency (para 19A; transition rules in paras 60L–60M).\n- Requires specific disclosures when an estimated spot exchange rate is used — nature and financial effect of the lack of exchangeability, the spot rate(s) used, the estimation process and inputs, and related risks (paras 57A–57B and A18–A20).\n- Adjusts the conditions for recognising severe hyperinflation by making lack of exchangeability an explicit characteristic to consider (AASB 1 paras 31C and D27).\n- Provides a transition approach: effective for annual periods beginning on or after 1 January 2025 (earlier application allowed); comparative periods are not restated and initial effects are recognised in opening retained earnings or accumulated translation differences as applicable (paras 60L–60M; AASB 1 para 39AI).\n- Preserves a disclosure relief for Tier 2 entities applying AASB 1060 so they are not required to provide the new AASB 121 disclosure items (AusAB1 / AASB 1060 amendments).\n\n**Who is affected**\n\n- Preparers and auditors of Australian general purpose financial statements that have foreign-currency transactions, carry assets/liabilities in currencies subject to controls, or translate foreign operations (entities reporting under AASB 121 and AASB 1). (See paras 20–47 cross-referenced by Appendix A guidance.)\n- Users of financial statements (investors, creditors, analysts) who rely on reported amounts and foreign-exchange disclosures for decision-making; they will see added explanatory information when non-exchangeability is relevant (paras 57A–57B).\n- Entities with simpler reporting obligations (Tier 2) are explicitly exempted from the new disclosure requirements so their compliance burden is not increased (AusAB1).\n\n**Why it matters (purpose claims and how the instrument changes behaviour)**\n\n- The AASB states the amendments are intended to improve the usefulness of information about foreign-currency measurements when market exchangeability is lacking, by requiring a consistent assessment of exchangeability and a consistent approach to estimating a spot rate where needed (Preface: Main requirements; para 19A).\n- Practically, preparers must exercise judgement to decide whether a currency is exchangeable for specified purposes (Appendix A paras A2–A10), choose or construct an estimated spot rate when it is not (paras A11–A17), and disclose the methodology and effects (paras 57A–57B, A19–A20). That changes preparer behaviour by introducing: (a) new assessment steps; (b) documentation and estimation processes; and (c) additional disclosure work.\n\n**Costs, incentives, trade-offs and implementation risks**\n\n- Compliance burden: Entities must develop policies, make potentially complex judgements about exchangeability for different purposes (settling individual transactions vs. translating net assets), maintain evidence of those judgements, and prepare qualitative and quantitative disclosures (paras 8A–8B, A7, A19). Auditors will also need to audit those judgements and estimations.\n- Estimation and measurement risk: The Standard gives discretionary choice of estimation technique (observable rates, first subsequent rate, or adjusted rates) (paras 19A, A11–A17). That discretion can produce variability between entities in reported amounts and disclosures unless preparers converge on common practices.\n- Financial statement impacts at transition: Because comparatives are not restated, initial application may create one‑off adjustments to retained earnings or translation reserves (paras 60M(a)(ii), 60M(b)(iii); AASB 1 para 39AI). That concentrates the immediate accounting effect on opening balances rather than on prior-period disclosures.\n- Implementation cost vs. user benefit trade-off: Users gain more targeted information about the effects of currency controls or non-exchangeability (paras 57A, A18–A20), but preparers (especially those with many foreign-currency items or operating in multiple jurisdictions) face upfront and ongoing compliance costs.\n- Risk of inconsistent application: The Standard relies on legal and factual determinations (enforceable rights, applicable exchange mechanisms, and the purpose of obtaining currency) that vary by jurisdiction and by purpose (paras A4–A7). Different reasonable interpretations could reduce comparability across entities.\n- Reduced burden for smaller/simple reporters: The explicit exemption for Tier 2 entities (AASB 1060 / AusAB1) reduces administrative costs for that group but preserves the disclosure requirement for full reporters.\n\n**Who pays and who decides**\n\n- Preparers pay the compliance costs (management time, accounting systems, external advisers/audit fees) to assess exchangeability, estimate spot rates, and prepare disclosures (paras 8A–8B, 19A, 57A–57B, A11–A20).\n- Auditors and regulators (including the AASB through standard-setting) are the primary decision-makers for acceptability of estimation approaches and disclosure sufficiency; domestic enforcement will depend on usual audit and regulatory oversight mechanisms.\n\n**Concrete implementation requirements to note**\n\n- Assess exchangeability separately for different purposes (reporting transactions, translating presentation currency, translating foreign operations) (paras A7–A9).\n- If a currency is not exchangeable, estimate and use a spot exchange rate that reflects an orderly market transaction at the measurement date (para 19A; guidance A11–A17).\n- Disclose detailed information to allow users to understand the effect and the estimation method (paras 57A–57B; A19–A20).\n- Apply for reporting periods from 1 January 2025 (earlier permitted); do not restate comparatives on transition (paras 60L–60M).\n\n(Primary relevant paragraphs: AASB 121 paras 8, 8A–8B, 19A, 26, 57A–57B, 60L–60M; Appendix A paras A1–A20; AASB 1 paras 31C, D27, 39AI; AASB 1060 AusAB1.)"},"kimi_summary":{"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":false,"description":"The legislation maintains its original scope as a technical amendment to existing standards. It does not expand beyond its stated purpose of implementing the IASB's August 2023 amendments regarding lack of exchangeability. The amendments to AASB 1060 are narrowly tailored to preserve existing exemptions for Tier 2 entities rather than expanding the standard's reach."},"complexity_factors":["Multiple cross-referenced standards amended simultaneously (AASB 1, AASB 121, AASB 1060)","Nested conditional logic for assessing exchangeability (purpose-specific tests in paragraphs A6-A9)","Two-step assessment framework (Step I: exchangeability test; Step II: estimation methodology)","Extensive application guidance (Appendix A with 20 paragraphs of detailed guidance including a decision diagram)","Multiple estimation techniques permitted with specific conditions (observable rates vs. other techniques in paragraphs A11-A17)","Purpose-specific assessment requirements (different tests for functional currency reporting vs. presentation currency translation vs. foreign operations)","Transition provisions with retrospective adjustment requirements (paragraphs 60L-60M with specific accounting treatments for different scenarios)","17 new defined or elaborated concepts (exchangeability, normal administrative delay, enforceable rights and obligations, specified purpose, insignificant amount, first subsequent rate, etc.)","Disclosure requirements with nested objectives and specific line-item mandates (paragraphs 57A, A18-A20)"],"plain_english_summary":"This amendment fixes how companies account for currencies that cannot be freely converted (due to controls or no FX market). It requires a consistent method for deciding if a currency is exchangeable and for estimating a fair exchange rate when it is not.\n\nIt mainly affects entities with operations in restricted or unstable currency jurisdictions, and clarifies disclosures so investors and regulators can see the financial impact; Tier 2 reporters are exempt from detailed disclosure requirements."},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"}},"importantCases":[],"_links":{"self":"/api/acts/accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit","history":"/api/acts/accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit/history","analysis":"/api/acts/accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit/analysis","conflicts":"/api/acts/accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit/conflicts","importantCases":"/api/acts/accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit/important-cases","documents":"/api/acts/accounting-standard-aasb-2023-5-amendments-to-australian-accounting-standards-lack-of-exchangeabilit/documents"}}