Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p33
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 33/47)
Character Range: 115280–118309

AASB 10 however, require consolidation if an entity is a parent, with limited exceptions.[29]

     BC47            This reporting entity clash was addressed in ITC 39, and ITC 39 sought comment on the clash between the reporting entity concepts in the RCF and SAC 1 and the related SPFS problem. The requirements of this Standard have been informed by the Board's research and consultation undertaken prior to and since ITC 39 was issued. The results of that research and consultation, and how it influenced the Board's decisions, are outlined throughout this Basis for Conclusions.

     BC48            To address the reporting entity clash, ITC 39 considered a number of options to apply the RCF (refer to paragraphs BC52-BC57), including considering whether it would be feasible to operate with two conceptual frameworks[30] – the RCF for publicly accountable entities and entities that wish to claim IFRS compliance, and the current Framework for the Preparation and Presentation of Financial Statements (existing Conceptual Framework) for other entities (which would include maintaining SAC 1, the Australian reporting entity concept and SPFS for all entities not applying the RCF). However, the Board decided that this option was not feasible, as new and revised AAS will be based on the RCF, which includes revised definitions and recognition criteria for assets and liabilities, a new chapter on the reporting entity and a new chapter on measurement. Therefore, if entities continued to apply the existing Conceptual Framework when developing accounting policies or interpreting AAS, they are likely to develop inappropriate accounting policies or incorrectly interpret AAS. This could result in inaccurate and inconsistent financial reporting which would reduce the transparency and comparability for users of financial statements.

     BC49            Updating the existing Conceptual Framework for the changes made via the RCF other than the reporting entity concept was also not feasible given the pervasive use of 'reporting entity' throughout the RCF. The Board also considered an option to simply rename the reporting entity concept in SAC 1 to resolve the reporting entity clash.[31] The Board however decided that this approach would not meet any of the justifiable circumstances set out in The AASB's For-Profit Entity Standard-Setting Framework for the AASB to have different requirements to IFRS Standards. Further, this would be inconsistent with the AASB's legislative requirements to ensure there are appropriate accounting standards for each type of entity that must comply with accounting standards and to facilitate consistency, comparability, transparency and enforceability (refer paragraph BC16). This is because such an approach would not resolve the fundamental issues with the public lodgement of SPFS, which is addressed in the next section, or the evident inconsistency in practice and lack of transparency.

Resolving the issues

     BC50            In light of the evidence provided to the