Document ID: chunk:federal_register_of_legislation:F2022C01110:reg:20:p34
Version: federal_register_of_legislation:F2022C01110
Segment Type: reg
Provision Reference: reg 20 (pt 34/40)
Character Range: 130995–134125

of the proposed amendment to for-profit private sector entities. This was because the exemption in paragraph D16(a) could be applied by any for-profit entity or not-for-profit (NFP) entity that becomes a first-time adopter of Australian Accounting Standards later than its parent (subject to meeting the conditions of the exemption). The objective of the optional exemption as outlined in paragraph BC13 applies equally to all types of entities.

Entities transitioning to consolidated Tier 2 Simplified Disclosures financial statements
BC16            Another subset of entities affected by the removal of the reporting entity concept is entities that were preparing unconsolidated GPFS (Tier 2 – Reduced Disclosure Requirements). That is, the GPFS complied with all the recognition and measurement requirements in Australian Accounting Standards without presenting consolidated financial statements, in accordance with an exemption in AASB 10. This includes some entities that are classified under Australian taxation legislation as "country-by-country reporting entities" (CBC entities).

BC17            CBC entities are required to prepare GPFS to comply with their CBC reporting obligations to the Australian Taxation Office (ATO). However, some CBC entities that are parent entities maintained they were not reporting entities as defined in Australian Accounting Standards and continued to apply the exemption in AASB 10 that did not require the presentation of consolidated financial statements if neither the parent entity nor the group was such a reporting entity. The Board understands that this approach was acknowledged as an available option in ATO guidance.

BC18            However, as the 'reporting entity' definition in Australian Accounting Standards no longer applies to certain for-profit private sector entities, including CBC entities, for periods beginning on or after 1 July 2021, these entities can no longer apply the consolidation exemption in AASB 10. Instead, they will be required to prepare consolidated financial statements under AASB 10 for the first time.

BC19            The Board noted that such entities were not required to present consolidated financial statements in prior periods as outlined in paragraph BC17. Further, their most recent Tier 2 GPFS complied with all relevant recognition and measurement requirements in Australian Accounting Standards. The Board acknowledged an absence of specific guidance in Australian Accounting Standards for these entities.

BC20            However, the Board noted that specific guidance was included in AASB 1053 (paragraph 18A(b)) to explicitly allow entities that were preparing SPFS on the same basis – that is, their SPFS complied with all the recognition and measurement requirements without presenting consolidated financial statements, on the basis that neither the parent nor the group was a reporting entity – to apply AASB 1, including the relief for the first-time preparation of consolidated financial statements set out in Appendix C, to their transition to Tier 2 GPFS.

BC21            The Board previously considered whether the