Document ID: chunk:federal_register_of_legislation:F2023C00190:reg:9b:p5
Version: federal_register_of_legislation:F2023C00190
Segment Type: reg
Provision Reference: reg 9B (pt 5/41)
Character Range: 120487–123773

Accounting Standards.  30% state non-compliance with the recognition and measurements requirements in Australian Accounting Standards.  It is not clear for the remaining 44% whether or not they complied with the recognition and measurement requirements in Australian Accounting Standards.[6]  Research also indicates that there are issues with the accuracy of charities stating they are preparing general purpose financial statements.[7]

     BC7               In addition to it being difficult for the researchers to understand the extent of alignment of an entity's accounting policies to the recognition and measurement requirements in Australian Accounting Standards, the researchers were also unable to ascertain whether or not an entity had fully consolidated its subsidiaries or equity accounted all its investments in associates and joint ventures.

     BC8               The Board discussed the results of the research outlined above and also feedback obtained from respondents to user surveys, along with evidence supporting the existence of users of financial statements, including special purpose financial statements.[8] The Board also noted the importance of consistency, comparability, transparency and enforceability in financial reporting to special purpose financial statement users, and that at times users and other stakeholders were unaware that some special purpose financial statements (where the preparation of financial statements in compliance with Australian Accounting Standards is required by legislation or otherwise) did not comply with all the recognition and measurement requirements in Australian Accounting Standards including consolidation.  Adoption of the new disclosures in this Standard helps address these issues.

     BC9               The Board was also particularly concerned that the quality of disclosures in a significant number of special purpose financial statements is not adequate to enable a user to determine what additional information they might need.  As noted in paragraph BC6 above research indicated that, for 44% of medium and large charities lodging special purpose financial statements with the ACNC, it was unclear to the academics conducting the research whether or not the entities in question complied with the recognition and measurement requirements in Australian Accounting Standards.  The Board considers this to be unacceptable given the feedback received from users regarding consistency and transparency of special purpose financial statements including comparability of the recognition and measurement requirements (refer paragraph BC5 above).

     BC10            In light of the Board's current broader project proposing to remove the ability for certain entities to prepare special purpose financial statements when they are required to comply with Australian Accounting Standards,[9] the Board considered whether it was necessary and timely to require an entity preparing special purpose financial statements to disclose whether or not the accounting policies applied in the financial statements comply with all the recognition and measurement requirements in Australian Accounting Standards.  These new disclosures are an interim measure aimed at addressing these concerns given the project proposing to