Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p24
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 24/47)
Character Range: 89821–92895

being applied as intended by SAC 1;

          (b)                   the reporting entity concept appears too subjective for regulators to enforce effectively and accordingly does not create a level playing field; and

          (c)                    63% of SPFS lodged with ASIC stated compliance with the R&M requirements of applicable AAS, suggesting that R&M was not always complied with despite regulatory guidance suggesting this should be the case (see paragraphs BC28-BC29).

     BC19            The Board also initiated subsequent research[11] to understand how the reporting practices of for-profit entities lodging SPFS with ASIC may have changed since the introduction of the RDR reporting framework in 2010. An analysis of financial reports of the specified for-profit entities lodging financial statements with ASIC in 2018 confirmed that 71% of these entities were still lodging SPFS with ASIC, 13% lodged Tier 2 GPFS and 16% lodged Tier 1 GPFS. The Board also noted that those entities preparing Tier 2 GPFS (RDR) appear to have moved from Tier 1 GPFS to RDR and not from SPFS to RDR.

     BC20            In respect of compliance with the R&M requirements in AAS, the Board noted the more detailed findings of Research Report 12, which estimates that 76% of specified for-profit entities preparing and lodging SPFS with ASIC complied with the R&M requirements in AAS. In particular:

          (a)                    66% explicitly stated that they followed the R&M requirements in AAS (compared with the 63% found in Research Report No.1 – see paragraph BC18(c)); and

          (b)                   10% were assessed to have complied with the R&M requirements in AAS based on a qualitative review of the accounting policies, despite the absence of an explicit statement to that effect.

     BC21            For the remaining 24%:

          (a)                    10% did not comply with the R&M requirements in AAS (of which only 0.5% clearly stated so); and

          (b)                   the extent of compliance (or otherwise) with the R&M requirements in AAS of the remaining 14% was unclear.

     BC22            In addition to it being difficult for the researchers to understand the extent of alignment between an entity's accounting policies and the R&M requirements in AAS, the Board noted the same difficulties faced by financial statement users. This leads to fundamental issues with the transparency of information available to users of publicly lodged SPFS, consistency and the comparability of SPFS with other SPFS and GPFS. As noted in paragraph BC15, only 76% of entities preparing SPFS are voluntarily complying with RG 85 recommendations, suggesting that mandatory requirements were needed to improve the quality of financial reporting.

     BC23            In response, in July 2019, the Board issued ED 293 Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Compliance with Recognition and Measurement Requirements which proposed, as an interim measure, amendments to AAS to