Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p19
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 19/47)
Character Range: 75342–78449

importance to primary users[4] and 100% in importance to other users. They also expressed concern that key information is omitted from SPFSs (see paragraphs BC37-BC41).

     BC3               Regulatory scrutiny of SPFS has also increased, for example in the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the regulation of auditing, the Senate Economics References Committee Report on Tax Avoidance, and the requirement for all Significant Global Entities (SGEs) to lodge GPFS with the Australian Taxation Office (ATO) (see paragraph BC32(a)).

     BC4               Within the context of the AASB's International Financial Reporting Standards (IFRS Standards) adoption policy, the issue of a revised Conceptual Framework for Financial Reporting (March 2018) (referred to throughout this Basis for Conclusions as 'the RCF') by the International Accounting Standards Board (IASB) provides a timely opportunity to once again consider how best to improve the quality of financial reporting in Australia by solving the so-called 'SPFS problem' via a broader project aimed at removing the ability of certain for-profit private sector entities to prepare SPFS when they are required to prepare financial statements that comply with AAS.[5] The Board is progressing with this project by considering each sector separately, in the first instance for-profit private sector entities required to comply with AAS (being the subject of this Standard – as explained in paragraphs BC68-BC93).

     BC5               The Board noted the Australian Government Treasury change in thresholds for large proprietary companies which defined the entities that are required to lodge their financial statements with ASIC (unless exempted by ASIC) in April 2019. Treasury doubled the thresholds used for determining what constitutes a large proprietary company. As set out in the Explanatory Memorandum accompanying the increase, the revised thresholds were set with the expectation of capturing entities with economic significance and noted the larger the entity, the more likely it is that there are GPFS users. These are key criteria in the AASB's Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity for determining whether or not an entity is a reporting entity.

     BC6               As noted in paragraph BC4, the solution to the SPFS problem provided by this Standard is to remove the ability of certain for-profit private sector entities to self-assess their financial reporting requirements and prepare SPFS when they are required to prepare financial statements that comply with AAS.[6] This will improve the consistency, comparability, transparency and enforceability of financial statements, thus meeting the needs of users who are accessing these financial statements on a public register or otherwise. The Board acknowledged that these changes could not be implemented in isolation, as merely removing the ability of certain for-profit private sector entities to prepare SPFS with no other mitigating action would result in increased reporting requirements