Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p21
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 21/47)
Character Range: 81382–84436

Consultation Paper – Applying the IASB's Revised Conceptual Framework and Solving the Reporting Entity and Special Purpose Financial Statement Problems

     BC10            As noted in paragraph BC2, the Board had been aware of the problems with the application of the reporting entity concept and the consequential preparation and public lodgement of SPFS for some time. Indeed, the Board has previously publicly contemplated the removal of the ability of certain entities to self-assess and prepare SPFS when required to comply with AAS. For example:

          (a)                    AASB Invitation to Comment ITC 12 Request for Comment on a Proposed Revised Differential Reporting Regime for Australia and IASB Exposure Draft of A Proposed IFRS for Small and Medium-sized Entities (May 2007) noted the concept of SPFS might have been misunderstood in some cases. To remove the ambiguity concerning the reporting entity concept, ITC 12 sought comment on whether all financial statements available on a public register should be required to be GPFS; and

          (b)                   AASB Consultation Paper (CP) Differential Financial Reporting – Reducing Disclosure Requirements (February 2010) and ED 192 Revised Differential Reporting Framework (February 2010), issued in tandem, followed ITC 12 and reaffirmed the Board's view that the reporting entity concept which allows the public lodgement of SPFS should be removed. The Board elaborated on the issues surrounding SPFS in the CP, including noting that:

               (i) entities are asserted to be 'abusing' the reporting entity concept by claiming to be non-reporting entities and preparing SPFS when they should be preparing GPFS. An impetus for this is the desire to avoid the cost and exposure that would come from applying full IFRS Standards as adopted in Australia;

               (ii) many of the regulators requiring the preparation and lodgement of financial statements may not have given sufficient consideration to the nature of the information they require and the needs of any external users of that information; and

               (iii)                 preparation of SPFS by entities that are required by law to prepare financial statements in accordance with accounting standards and be lodged on a public register contradicts the legislation's objective of providing information to a wide range of users who are not in a position to command specific information to satisfy their needs.

     BC11            However, the Board noted mixed feedback from constituents in response to these due process documents in regard to removing the ability of certain entities to self-assess and prepare SPFS when required to comply with AAS, which suggested that (as noted in paragraphs BC10-BC17 of the Basis for Conclusions to AASB 1053):

          (a)                    on the one hand, the reporting entity concept involves a high degree of subjectivity, is not universally understood and hence does not provide the intended result, nor does it provide a robust criterion