Document ID: chunk:federal_register_of_legislation:F2022C01110:reg:20:p6
Version: federal_register_of_legislation:F2022C01110
Segment Type: reg
Provision Reference: reg 20 (pt 6/40)
Character Range: 53646–56745

for SMEs – see paragraph BC98).  The Board concluded that the reforms in AASB 1053 should not be delayed while consideration of other possible areas of reform continues.  The Board notes that important reforms are also being considered to reduce the complexity of full IFRSs, including in the area of financial instruments, which would help reduce reporting complexities when adopted in Australia, including for entities that would be subject to Tier 1 requirements.  The IASB is expected to move beyond financial instruments in its efforts to simplify requirements and the AASB will continue to encourage and support those efforts.
BC21            The new Tier 2 requirements do not change the current AASB policy of the same transactions and other events being subject to the same accounting requirements to the extent feasible (that is, transaction neutrality), for all entities preparing general purpose financial statements (whether for-profit or NFP).
BC22            The Board considered whether a third tier of reporting requirements for general purpose financial statements should be introduced to provide simpler financial reporting requirements for smaller NFP entities since those entities might find the adoption of Tier 2 requirements overly burdensome on cost-benefit grounds.  The Board noted that many NFP entities in the private sector are established as companies limited by guarantee under the Corporations Act or as associations under relevant Incorporated Associations Acts in each State and Territory.  Moreover, many non-trading cooperatives are regulated by State or Territory Acts.  Having regard to this legislation, the Board noted that a reason for contemplating the need for a third tier was that there is generally no NFP equivalent to the outright exemption from reporting that exists for small proprietary companies (see paragraph BC4 above).
BC23            The Board noted that while there is some support from constituents for creating a third tier, there are different views about the requirements of such a tier and the way entities applying those requirements should be identified.  The Board also considered the proposals for reporting relief in the Discussion Paper published by the Australian Government in June 2007 titled Financial Reporting by Unlisted Public Companies in relation to the creation of a third tier of reporting requirements for companies limited by guarantee[13].
BC24            The Board decided not to introduce a third tier of reporting requirements on the basis that:
(a)                    the Government intended to alleviate the reporting burden of small companies limited by guarantee through amendments to the Corporations Act; and
(b)                   Tier 2 requirements for preparing general purpose financial statements would help reduce the disclosure burden of NFP entities significantly.

Applicability of the Different Tiers to For-Profit Entities

Public Accountability
BC25            The Board concluded that for-profit entities that are publicly accountable (as defined in International Financial Reporting Standard