ScopeScope

Scope

1. [Deleted by the AASB]

2. For the purposes of this Standard, the term “bank” includes all financial institutions, one of whose principal activities is to take deposits and borrow with the objective of lending and investing and which are within the scope of banking or similar legislation. The Standard is relevant to such entities whether or not they have the word “bank” in their name.

Aus2.1 This Standard refers to banks and similar financial institutions. Banks and similar financial institutions includes financial institutions that as one of their principal activities take deposits and borrow with the objective of lending and investing but are not within the scope of banking or similar legislation. This Standard is relevant to banks, building societies, credit unions, finance companies, friendly societies and merchant banks.

Aus2.2 This Standard is relevant to other types of entities which are broadly involved in financial intermediation. For example, entities which undertake a primary function of borrowing funds for lending on to related entities, with the ultimate objective of reducing the cost of borrowing for those entities, are included. This means that, for example, central borrowing authorities in government jurisdictions and intragroup financiers are normally regarded as financial institutions. However, entities that raise funds principally from other entities in the group are excluded, regardless of whether the lending or investing is within or outside the group. These entities are unlikely to have significant external users of their financial reports.

Aus2.3 General insurers, life insurers and superannuation plans are specifically excluded from being treated as financial institutions for the purposes of this Standard.

3. Banks represent a significant and influential sector of business worldwide. Most individuals and organisations make use of banks, either as depositors or borrowers. Banks play a major role in maintaining confidence in the monetary system through their close relationship with regulatory authorities and governments and the regulations imposed on them by those governments. Hence there is considerable and widespread interest in the well-being of banks, and in particular their solvency and liquidity and the relative degree of risk that attaches to the different types of their business. The operations, and thus the accounting and reporting requirements, of banks are different from those of other commercial entities. This Standard recognises their special needs. It also encourages the presentation of a commentary on the financial statements which deals with such matters as the management and control of liquidity and risk.

4. This Standard supplements other Australian Accounting Standards which also apply to banks unless they are specifically exempted in a Standard.