Document ID: chunk:federal_register_of_legislation:F2022L01041:reg:4:p3
Version: federal_register_of_legislation:F2022L01041
Segment Type: reg
Provision Reference: reg 4 (pt 3/18)
Character Range: 53357–56414

AASB 2020-2 explains the Board's reasons for the decisions it made in that Standard and provides more information about the issues with SPFS reporting. (The Basis for Conclusions is also published with AASB 1057 Application of Australian Accounting Standards.)
     BC4               Given the limited scope of AASB 2020-2, the problems associated with SPFS prepared by for-profit private sector entities that are required to prepare financial statements that comply with AAS were not entirely resolved. This is because AASB 2020-2:
          (a)                   did not become immediately operative (AASB 2020-2 was issued in March 2020); and
          (b)                   contains an exemption that allows for-profit private sector entities that are required only by their constituting document or another document to prepare financial statements that comply with AAS to continue preparing SPFS if the relevant document was created before 1 July 2021 and not amended on or after that date.
     BC5               The continued preparation of SPFS that state compliance with AAS without further explanation, whether temporarily (until an entity transitioned to general purpose financial statements (GPFS) in accordance with AASB 2020-2) or for the foreseeable future (in relation to entities referred to in paragraph BC4(b)), remained a concern to the Board. Consistent with the AASB Evidence-Informed Standard-Setting Framework, the Board decided to address its concern by considering whether to issue a Standard having regard to the evidence it gathered through outreach to stakeholders and other forms of research. That research evinced users' clearly stated views on the importance of understanding the recognition and measurement (R&M) basis of preparation of financial statements. The Board also noted the findings of AASB Research Report 12 Financial Reporting Practices of For-Profit Entities Lodging Special Purpose Financial Statements (August 2019), which indicated the current deficiencies in clearly reporting the basis of preparation in SPFS (see also paragraphs BC20-BC22 of the Basis for Conclusions on AASB 2020-2).
     BC6               The Board noted some stakeholders were concerned about a lack of research-based evidence that demonstrates disclosure requirements would assist users' understanding of SPFS prepared by entities within the scope of this Standard. This concern arose because AASB Research Report 12 is based on data relating to entities within the scope of AASB 2020-2, rather than the types of entities referred to in paragraph BC4(b), and in any event it predates the change in proprietary company reporting thresholds under the Corporations Act 2001 and therefore does not provide any current analysis. However, the Board came to the view that the Research Report provides evidence by analogy as there is no basis to expect that SPFS of the types of entities referred to in paragraph BC4(b) would have adopted better disclosure practices than the SPFS of the types of entities that were the focus of the Research