Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p45
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 45/47)
Character Range: 149462–152528

categories 2, 3 and 8) in the summary of scope table in paragraph BC93 below).

Trusts and other entities with a non-legislative requirement to comply with AAS

     BC81            When deciding on the scope of Phase 1 of ITC 39 the Board's intention was to allow entities to maintain compliance with IFRS Standards, not to extend the requirement for entities to prepare GPFS if they were not currently required by legislation to do so. Respondents to ITC 39 identified some entities that may be affected by the amendments proposed in Phase 1, such as trusts required by their constitutional document (rather than legislation) to prepare financial statements that comply with AAS. They do not have any legislative requirement to prepare such financial statements and may be currently preparing SPFS. Therefore, transitioning to GPFS could be burdensome for those trusts.

     BC82            Consequently, the Board decided to limit Phase 1 to for-profit private sector entities that have public accountability and are required by legislation to comply with AAS, however it noted that the appropriateness of this limitation would be reconsidered as part of Phase 2 after additional research and outreach was performed.

     BC83            When reconsidering the appropriateness of this limitation the Board considered entities with a non-legislative requirement to prepare financial statements that comply with AAS more broadly than just those affected by Phase 1, noting there were likely to be a significant number of additional trusts possibly affected by Phase 2.

     BC84            Based on discussions with legal advisors and additional targeted outreach, it is expected that the constituting documents of most trusts contain a requirement for them to prepare financial statements in compliance with AAS (albeit they might refer to 'accounting standards'). These financial statements are prepared for a specific purpose and a specific user (eg the beneficiaries of a trust). It is also understood that many such entities, particularly 'non-corporate' trusts, prepare SPFS.

     BC85            The Board noted that:

          (a)                    as the financial statements are prepared for specific users, those users have the ability to command whatever information they require from the entity;

          (b)                   there is no external regulator of financial reporting for trusts; and

          (c)                    the financial statements of trusts are not lodged on public record.

     BC86           For these reasons, the Board considered whether it was appropriate to provide some form of relief to them, as the Board noted that while changing constitutional documents to remove the requirement to comply with AAS is possible, it can be onerous and if not done correctly can have tax consequences.

     BC87           Targeted outreach was undertaken to understand the number of trusts that may be affected by this Standard, including their size (with reference to income and assets). This was to determine whether it was