Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p5
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 5/47)
Character Range: 31491–34658

due to the so-called 'reporting entity clash'.  This reflects the difference between the definition of a 'reporting entity' in the IASB's revised Conceptual Framework and the current definition in Australian Accounting Standards (including Interpretations).  The reporting entity definition in the revised Conceptual Framework determines the boundary of what needs to be reported when an entity is required to report, e.g. consolidation.  The current reporting entity definition in Australian Accounting Standards determines whether an entity should prepare general purpose financial statements that comply with Australian Accounting Standards.

     BC6               In applying the Board's normal practice of transaction neutrality based on IFRS Standards, the Board noted that resolving the reporting entity clash required removing the Australian definition of reporting entity.  To do this would also remove the ability of an entity to conclude that it is not a reporting entity as currently defined, and so prevent it from preparing special purpose financial statements if it is required to prepare financial statements in accordance with Australian Accounting Standards.

     BC7               The Board noted that having two conceptual frameworks in operation at the same time would introduce some complexity to Australian Accounting Standards, and is not desirable for a long period of time.  Consequently, to implement the revised Conceptual Framework in the short term, the Board decided to follow a phased approach:
(a) Phase 1 – implement the revised Conceptual Framework for publicly accountable for-profit private sector entities so that they can maintain compliance with IFRS Standards.  The Board noted that there may also be for-profit entities in the public sector that wish to maintain compliance with IFRS Standards.  Phase 1 would permit these entities to adopt the revised Conceptual Framework on a voluntary basis; and
(b) Phase 2 – implement the revised Conceptual Framework for all other entities, and remove the ability for entities to prepare special purpose financial statements when they are required to prepare financial statements in accordance with Australian Accounting Standards.

     BC8               The Board expected that implementing the revised Conceptual Framework for publicly accountable for-profit private sector entities would be straightforward as such entities were, in the Board's view, required by Australian Accounting Standards to prepare Tier 1 general purpose financial statements applying all of the accounting standards.  As such the Board did not expect the reporting entity concept to be relevant to them.

     BC9               The phased approach would also provide the Board with more time to develop additional Australian-specific paragraphs for the revised Conceptual Framework in respect of not-for-profit entities in the private and public sectors and for-profit public sector entities, as part of Phase 2.

Issue of ITC 39 Applying the IASB's Revised Conceptual Framework and Solving the Reporting Entity and Special Purpose Financial Statement Problems

     BC10            The Board's proposals