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Accounting Standard AASB 2026-1 Amendments to Australian Accounting Standards – Disclosures about Uncertainties in the Financial Statements
Amendments to AASB 137Amendments to AASB 137
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Amendments to AASB 137
Guidance on implementing AASB 137
| Example 2A and the italicised introductory text are added. |
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D Examples: disclosures
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The example below illustrates the requirements in paragraph 85 of AASB 137. In particular, it illustrates how an entity might disclose information about plant decommissioning and site-restoration obligations even if their effect on the carrying amount of the entity’s plant decommissioning and site-restoration provision is immaterial.
| Example 2A Decommissioning and site-restoration obligations |
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| BackgroundThe entity is a manufacturer and has plant decommissioning and site-restoration obligations for its facilities. The entity assumes it will continue to maintain and operate some of its facilities for an extremely long time. Consequently, the costs required to settle the obligations related to these facilities will be incurred so far into the future that, when discounted to their present value, their effect on the carrying amount of the entity’s plant decommissioning and site-restoration provision is immaterial. However, the costs to settle the obligations relating to these facilities will be high and there is a significant and increasing risk that the entity might be required to close the facilities earlier than it expects. This risk stems from efforts to transition to a lower-carbon economy, which might include shifting consumer demand for the entity’s products and possible regulatory and policy actions to reduce greenhouse gas emissions in the jurisdictions in which the entity operates.ApplicationParagraph 85 of AASB 137 requires an entity to disclose information for each class of provision. The entity concludes that, although some of its plant decommissioning and site-restoration obligations have an immaterial effect on the carrying amount of its plant decommissioning and site-restoration provision (see the ‘Background’ section), information about these obligations is material. The entity reaches this conclusion after considering, among other factors: |
| (a) the size of the costs required to settle the obligations – the costs of settling the obligations are high;(b) the risk of early settlement – the risk that the entity might be required to settle the obligations earlier than expected is significant and is increasing; and(c) external climate-related qualitative factors – the industry and jurisdictions in which the entity operates (including the entity’s market, economic, regulatory and legal environments) make the information about the obligations more likely to influence the decisions that primary users of the entity’s financial statements make on the basis of the financial statements.In applying paragraph 85 of AASB 137, the entity discloses information about its plant decommissioning and site-restoration provision. This information includes information about the obligations that have an immaterial effect on the carrying amount of the provision. The information the entity discloses includes:(a) a brief description of the nature of the obligations and the expected timing of the outflows of economic benefits required to settle them.(b) an indication of the uncertainties about the amount or timing of those outflows. Where necessary to provide adequate information, the entity also discloses the major assumptions made concerning future events. These assumptions could include assumptions about the future use of each of the entity’s main facilities – for example, when the entity expects to close the facilities. |