The Australian Prudential Regulation Authority (APRA) today released the first of two discussion papers setting out its proposed prudential response to the adoption of International Financial Reporting Standards (IFRS) by APRA‑regulated institutions.

The paper deals with the prudential implications of a number of specific IFRS‑related changes to Australian accounting standards.

These include:
· fair value measurement;
· non-accrual loans and deferred acquisition costs;
· treatment of hedges;
· available for sale financial assets;
· property;
· excess of market value over net assets (EMVONA);
· loan loss provisioning; and
· employer sponsored defined benefit superannuation 
  plans

APRA’s Chairman, Dr John Laker, said APRA’s objective in its approach to IFRS is to align its prudential and reporting standards with Australian accounting standards and principles to the extent practicable.

“In certain circumstances, however, APRA’s prudential framework will depart from accounting standards where that is judged to be in the best interests of depositors and policyholders,” he said. “In shaping its approach, APRA will be taking into account the financial and prudential implications of IFRS for its regulated institutions, as well as international developments in this area.”

APRA’s intention is that, subject to consultation with interested parties, the proposals in this discussion paper will take effect from 1 January 2006. Appropriate transition arrangements will be allowed where the changes would have a material impact on individual institutions.

A second discussion paper will deal with the treatment of eligible Tier 1 capital instruments and securitisation. The two papers will be followed by consultation on changes to APRA’s prudential and reporting standards.

A copy of the paper is available according to industry sector at:

http://www.apra.gov.au/adi/Other-Information-for-ADIs.cfm

http://www.apra.gov.au/General/Other-Information-for-GIs.cfm

http://www.apra.gov.au/Superannuation/Other-Information-for-Superannuation.cfm

http://www.apra.gov.au/Life/Other-Information-for-Life-Insurance.cfm

http://www.apra.gov.au/Friendly/Other-Information-for-Friendly-Societies.cfm

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.APRA is funded largely by the industries that it supervises. It was established on 1 July 1998.APRA currently supervises institutions holding approximately $2.0 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.