Document ID: chunk:federal_register_of_legislation:F2023C00381:reg:25:p29
Version: federal_register_of_legislation:F2023C00381
Segment Type: reg
Provision Reference: reg 25 (pt 29/47)
Character Range: 103778–106849

prepare and, in most cases, publicly lodge financial statements with ASIC. In April 2019, Treasury announced changes to the Corporations Regulations 2001[19] to increase (double) the thresholds used for determining whether an entity is a large proprietary company, with companies falling below the thresholds not being required to prepare or publicly lodge financial reports with ASIC. As part of the changes, the Board suggested Treasury provide objective criteria based on economic significance for determining the thresholds and noted the commentary in Treasury's Explanatory Statement, which is consistent with the Board's decision to remove the ability of certain entities to prepare SPFS when they are required to prepare financial statements that comply with AAS. In particular, the Board noted:

          (a)                    the requirement for large proprietary companies to prepare and in some cases lodge financial reports was first introduced to focus regulation of reporting on the financial affairs of proprietary companies that have a significant economic influence; and

          (b)                   the financial reports of companies that have economic significance should be publicly available because of their size and potential to affect the community and the economy. The larger the size, the more likely it is that there will exist users dependent on GPFS as a basis for making economic decisions.

     BC36            This clearly indicates the new thresholds which apply from 1 July 2019 were set to reflect the 'economic significance' of the entities captured, which is another key criterion in SAC 1 for deciding whether or not an entity is a reporting entity.

Evidence from stakeholders, including financial report users

     BC37            In addition to the above, the Board noted the general agreement amongst stakeholders that there is an SPFS problem in its outreach both prior and subsequent to the issue of ITC 39. In considering submissions received on ITC 39 the Board noted that of the 33 formal respondents (relevant to this phase of the project), 85% agreed there is a problem with SPFS that needs to be solved, with similar feedback received anecdotally through other outreach activities.

     BC38            As part of the due process, a significant amount of feedback was provided by users of financial statements. Of particular importance is the AASB Staff Paper Enhancing the revised Conceptual Framework and replacing Special Purpose Financial Statements – For-profit User and Preparer Survey Results (December 2018), which indicated that, from the perspective of the 37 users (analysts, investors and creditors) that responded:

          (a)                    there is a problem with SPFS that needs to be addressed – 78% of primary users expressed concern that SPFS do not consistently apply R&M requirements in AAS;

          (b)                   93% of primary users and over 95% of other users said that comparability, transparency, comprehensibility and consistency are all paramount; and

          (c)