Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p34
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 34/47)
Character Range: 118048–121140

not resolve the fundamental issues with the public lodgement of SPFS, which is addressed in the next section, or the evident inconsistency in practice and lack of transparency.

Resolving the issues

     BC50            In light of the evidence provided to the Board in paragraphs BC9-BC49, the Board decided to resolve the clash between the reporting entity concepts, as well as to improve the consistency, comparability, transparency and enforceability of the for-profit private sector financial reporting framework, it is necessary to remove the Australian reporting entity concept (by making the consequential amendments to AAS set out in this Standard). This would remove the ability of an entity to self-assess that it is not a 'reporting entity' as currently defined in SAC 1, and so prevent it from preparing SPFS if it is required to prepare financial statements that comply with AAS.

     BC51            The Board concluded the removal of the self-assessment of the reporting entity concept and disallowance of the preparation of SPFS for certain for-profit private sector entities would simplify the reporting framework by providing a single set of minimum requirements, facilitating the objective of a consistent, comparable, transparent and enforceable Australian financial reporting framework. In arriving at this solution the Board considered a range of alternatives through ITC 39, as noted in the next section.

ITC 39

Preferred option in ITC 39

     BC52            As noted in paragraph BC47, ITC 39 was a precursor due process document to this Standard. In ITC 39 the Board considered five different options for implementing the RCF in Australia and the benefits and barriers of each option. After considering the comments from respondents on ITC 39, the Board decided to adopt Option 1 in ITC 39, a two-phased approach to applying the RCF:

          (a)                    in the short term maintaining compliance with IFRS Standards for publicly accountable for-profit private sector entities required by legislation to comply with AAS and other for-profit entities voluntarily claiming compliance with IFRS Standards (Phase 1); and

          (b)                   in the medium term maintaining IFRS Standards as a base by removing the Australian reporting entity concept from AAS and providing a revised Tier 2 GPFS framework (Phase 2). This would remove the ability of an entity to prepare SPFS where they are required to prepare financial statements that comply with AAS.

     BC53            The Board decided in favour of this two-phased approach because it:

          (a)                    allowed for-profit private sector entities with public accountability and entities that voluntarily report compliance with IFRS Standards to continue to do so;

          (b)                   allowed all other entities to continue preparing SPFS in the short term while the Board undertook consultation and outreach activities and determined the appropriate Tier 2 GPFS framework to replace SPFS;

          (c)                    maintained IFRS Standards as a