Key Impacts

• Certain fees (such as loan approval & financial service fees) previously reported in Non Interest Income, are capitalised and amortised to net interest income as a yield adjustment over the lives of the financial instruments to which they relate.
• Illustrative examples of future treatment of fees (PDF 121kB)

• ANZ StEPS hybrid Tier 1 instrument currently treated as equity will be reclassified as debt. Accordingly ongoing distributions will be classified as interest expense rather than as dividends.

• Write-back of notional INGA and other equity accounted investments' goodwill amortisation, previously included in the share of joint venture and associates profit. Under AIFRS goodwill is no longer amortised, rather it is subject to impairment testing.

• Fair value movements on derivatives that were previously included in a hedging relationship under AGAAP and accrual accounted. Under AIFRS these hedges do not meet the hedge accounting criteria.

• Write-back of goodwill amortisation. Under AIFRS goodwill is no longer amortised, rather it is subject to impairment testing.

• Largely due to expenses relating to securitisation entities now brought on balance sheet

• Under AIFRS the Bad & Doubtful Debt charge reflects movements in Individual Provisions (previously Specific Provisions) and Collective Provisions.
• The movement in Collective Provisions is a function of change in portfolio size, portfolio mix, changes in risk profile, specific macro events and economic cycle outlook.
• Under AGAAP the annual ELP charge was determined as the average one year loss expected to be incurred if the same loan portfolio was held over an economic cycle.
• Under AIFRS the charge reflects a small reduction being the impact of the strengthening risk profile largely offset by the estimated impact of higher oil prices.
• Additional disclosure on credit loss provisioning (PDF 86kB)

• Tax impact of share based payments expense recognition.

• Tax impact of credit loss provisioning.

• Largely due to tax impacts relating to securitisation entities now brought on balance sheet.

The changes to goodwill and intangible assets reflect:

• The write-back of goodwill amortisation. Under AIFRS, goodwill is no longer amortised, rather it is subject to impairment testing($179m).
• The reclassification of software assets from premises and equipment to intangibles($387m).
• The de-recognition of intangible assets associated with the Origin business where, under AIFRS, the definition of a business combination is not met (decrease of $25m).

• Under AIFRS, certain fees which are integral to the yield of a financial instrument (such as loan approval & financial service fees), are capitalised and amortised over the expected useful life of the financial instruments to which they relate.

• AIFRS is more prescriptive than previous AGAAP in its guidance on impairment provisioning and requires discounting cash flows.
• Under AIFRS, provisions can only be raised for loans where a "loss event" has occurred and is objectively verifiable.
• Under AGAAP, the annual (ELP) charge was determined as the average one year loss expected to be incurred if the same loan portfolio was held over an economic cycle.
• The adjustment to NLAs reflects the reduction of provisions previously charged under ELP where an objectively identifiable "loss event" has yet to occur.

The following AIFRS changes drive the decrease:

• The designation of a portfolio of loans that it intends to sell as Available for Sale ($951m).
• The reclassification of effective yield income relating to certain structured leasing transactions from Other Liabilities ($257m) and associated marketing fees from Other Assets (increase of $79m).

• Additional securitisation entities and financial assets held with ANZ Group, previously not consolidated, are required to be brought on balance sheet resulting in some instances of intercompany eliminations.

• Adjustment to reflect the market value of counterparty risk in the fair value of derivatives. Under AGAAP, counterparty risk was notionally allowed for as part of the General Provision.

• AIFRS introduces stricter requirements for recognition of financial assets including those transferred to SPVs for securitisation.
• Additional securitisation entities and related trading and investment securities, previously not consolidated, now brought on balance sheet.

"Other" reflects the combination of

• On adoption of AIFRS, the Group has designated a portfolio of loans and certain corporate bonds that it intends to sell as Available for Sale.
• Under AIFRS, quoted trading and investment securities are measured at 'bid' or 'offer' prices rather than 'mid' prices.

• Reduced value of INGA impacted by: - Increased policy liabilities resulting from a change in the actuarial valuation. Under AIFRS the liabilities are discounted at the risk free rate and exclude deferred acquisition costs (DACs), previously the margin on services approach permitted policy liabilities to be measured on a present value basis, inclusive of DACs.
  - Initial fee income previously taken to income upfront will be deferred and amortised to income over time.
  These reductions to the carrying value of the investment in INGA are offset by the write-back of notional INGA goodwill amortisation of $43m for the year ended 30 September 2005 and the increase in deferred acquisition costs associated with the funds management and life insurance businesses.

• Reclassification of software assets from premises and equipment to intangibles.

• Recognition of surplus net assets in certain defined benefit superannuation schemes as an asset. Under AGAAP, these schemes were accounted for on a cash basis with the net position not recognised as an asset.

• AIFRS introduces stricter requirements for recognition of financial assets, including those transferred to SPVs for securitisation and related assets previously not consolidated,are now brought on balance sheet.

• Under AIFRS, ANZ StEPS is reclassified from equity to liabilities and as a result, the related prepaid issue costs have been recognised separately.

• The write-back of capitalised brokerage costs.

• Deferred tax assets associated with a number of defined benefit pension plan deficits. A defined benefit liability of $166m is booked in "other liabilities".

• Deferred tax assets related to re-measurement of derivatives at fair value rather than cost.

• Under AIFRS, ANZ StEPS is reclassified from equity to liabilities and as a result, the related prepaid issue costs have been recognised separately.

• Includes deferred tax assets associated with share based payments.

• AIFRS introduces stricter requirements for recognition of financial liabilities including those transferred to SPVs for securitisation.
• Additional securitisation entities previously not consolidated and related deposits and other borrowings, are required to be brought on balance sheet.

• Additional securitisation entities and financial assets held with ANZ Group, previously not consolidated, are required to be brought on balance sheet resulting in some instances of intercompany eliminations.

• Under AIFRS, certain derivative financial instruments are measured at 'bid' or 'offer' prices rather than 'mid' prices.

• Under AIFRS ANZ StEPS is reclassified from equity to liabilities. The face value of StEPS securities is A$1b.

• The designation of fair value hedges held in respect of certain interest rate exposures results in fair value movements in the hedging instruments being offset against the hedged item.

• Recognition of the net deficit in certain defined benefit superannuation schemes as a liability. Under AGAAP, these schemes were accounted for on a cash basis with the net position not recognised as a liability

• Separate disclosure of derivative liabilities, previously included in other liabilities.

The following AIFRS changes drive the decrease:

• The reclassification of effective yield income relating to certain structured leasing transactions from Net Loans and Advances ($257m).
• Reclassifications of bonds previously included in an AGAAP hedging relationship and offset against the underlying hedged item (increase of $126m).

• Reclassification of non lending loss provisions associated with additional securitisation entities and related assets being brought on balance sheet.

• Deferred tax liability associated with a number of defined benefit pension plan surpluses. A defined benefit asset of $8m is booked in "other assets".

• Deferred tax liability resulting from the designation of certain fair value and cash flow hedges held in respect of interest rate exposures.

• Impact of calculating deferred tax using the 'balance sheet method' i.e. determining temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax.
• AGAAP applied the 'statement of financial performance' approach whereby tax expense was calculated using profit adjusted for non-assessable and non-deductible items.