The Australian Accounting Standards Board (AASB) decided to make AASB 2008-11 Amendments to Australian accounting standard: business combinations among not-for-profit entities (AASB 3), a standard which requires not-for-profit entities to apply the revised AASB 3 Business combinations, except where there is common control, at its November meeting.
AASB 2008-11 requires assets acquired in a merger of not-for-profit entities to be re-measured, normally at fair value, at the merger date.
Any gain from a merger will be recognised in profit or loss. The alternative view is that the recognition of such a gain does not fairly reflect the performance of the acquiring entity.
In response, the AASB indicated that the appropriate information may be presented in the financial statements to enable users to clearly distinguish this gain from the results of other activities.
But, the AASB has decided to maintain the options for local governments giving them the choice as to whether to re-measure assets acquired in an amalgamation of local governments. The board will revisit local government requirements when it considers the fundamental issue of control in the public sector.
AASB 2008-11 applies to annual reporting periods beginning on or after 1 July 2009 with early adoption permitted for annual reporting periods beginning on or after 30 June 2007, but before 1 July 2009.
If early adoption is elected, this must be disclosed and AASB 127 Consolidated and separate financial statements (March 2008, as amended) must be applied at the same time.
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