Document ID: chunk:federal_register_of_legislation:F2025C00209:reg:221:p35
Version: federal_register_of_legislation:F2025C00209
Segment Type: reg
Provision Reference: reg 221 (pt 35/73)
Character Range: 259234–262346

only required disclosure of a narrative explanation of any significant differences between the tax expense (income) and accounting profit multiplied by the applicable tax rate without requiring a numerical reconciliation. Stakeholder feedback on this proposed reduction in disclosures was mixed. Amongst others, the Australian Taxation Office noted that the audited tax reconciliation is an important source of information for its risk identification and assessment purposes.

      2.             After considering the stakeholders' feedback, the Board decided to require disclosure of a numerical tax reconciliation (paragraph 178(c)) on the basis that this is a public policy issue. The Board further noted that there has been significant interest in the income tax disclosures not only by regulators but also by the public in general, as part of the focus on possible tax avoidance in particular by multi-national entities.

Individually material items of income and expenses

      1.             Some respondents to ED 295 were concerned about the absence of a specific requirement to disclose individually material items of income and expenses and noted that this disclosure is currently explicitly required for both RDR GPFS and SPFS. While the Board acknowledged these concerns, it noted that entities applying this Standard are still expected to disclose information that is not presented elsewhere but that is relevant to an understanding of the financial statement in accordance with paragraph 91(c). This would include information about individually material items of income and expense where information about these items is necessary to assess the entity's financial performance.

      2.             However, the Board, also agreed to monitor entities' disclosure practices and may revisit this issue should it become apparent that entities do not provide sufficient disclosures in this regard.

Imputation credits

      1.             In response to stakeholders' feedback, the Board decided to add in paragraphs 100–103 the disclosure of imputation credits from paragraphs 12–15 in AASB 1054. The Board noted that, although the disclosure of imputation credits was not required under the current RDR framework, it was mandatory for entities preparing SPFS under Part 2M.3 of the Corporations Act 2001 and therefore it should not be onerous to provide for the majority of entities transitioning from SPFS to the new Tier 2 GPFS.

      2.             The Board noted that Australia and New Zealand are among a limited number of jurisdictions that have an imputation tax regime and information about imputation credits provides useful information as the credits have the characteristics of an asset to equity investors. Moreover, published research demonstrates that the franking status of dividends increases the association between dividends and future earnings and therefore provides useful information about an entity's future earnings potential and short-term cash flows.[58] Requiring the disclosure will ensure that information about the entity's imputation credits will not be lost when