Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p11
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 11/47)
Character Range: 48736–51872

statements on the basis that they are not reporting entities.  However, as they are holding assets in a fiduciary capacity, they may be considered to have public accountability under the definition in the IFRS for SMEs.  The Board noted that its decision to limit the scope of Phase 1 to entities required by legislation to prepare financial statements would mean that these trusts would be considered as part of Phase 2.

Legislation versus constituting documents

     BC29            Respondents to ITC 39 identified some entities that may be affected by the amendments proposed in Phase 1, including trusts that are required by their constitutional document (rather than legislation) to prepare financial statements that comply with Australian Accounting Standards.  They do not have any legislative requirement to prepare such financial statements and may be preparing special purpose financial statements.  This includes securitisation trusts and certain public sector trusts.

     BC30            The Board noted that while changing constitutional documents is possible, it can be onerous and if not done correctly can have tax consequences.  Many trust deeds may have template wording referring to compliance with Australian Accounting Standards without the trustees or the beneficiaries having considered whether this would need to involve the preparation of general purpose financial statements.  Based on feedback obtained from targeted outreach activities, these trusts may provide detailed information to their beneficiaries about their financial performance and position on a regular basis.

     BC31            The AASB's For-Profit Entity Standard-Setting Framework requires publicly accountable for-profit entities to prepare Tier 1 general purpose financial statements on the basis that these entities would need to state compliance with IFRS Standards.  However, entities that do not have any legislative requirement to prepare financial statements and are required only by their constitution or trust deed to comply with Australian Accounting Standards often will not need to confirm compliance with IFRS Standards.

     BC32            The AASB's For-Profit Entity Standard-Setting Framework further notes that publicly accountable entities should prepare Tier 1 general purpose financial statements as these types of entities would have a significant impact on the Australian economy and therefore should be subject to the highest level of accountability.  However, where entities are required to comply with Australian Accounting Standards only as a result of their constitution or trust deed, and their members have in the past been comfortable with the amount of information provided in the form of special purpose financial statements, the Board did not consider it appropriate to mandate the preparation of Tier 1 general purpose financial statements for such entities as part of Phase 1.

     BC33            Consequently, Phase 1 is intended to allow entities to maintain compliance with IFRS Standards, not to extend requirements for entities to prepare general purpose financial statements if they are