Document ID: chunk:federal_register_of_legislation:F2023C00190:reg:9b:p4
Version: federal_register_of_legislation:F2023C00190
Segment Type: reg
Provision Reference: reg 9B (pt 4/41)
Character Range: 117603–120793

Errors.

     BC3               Appendix A of AASB 1053 Application of Tiers of Australian Accounting Standards defines what a reporting entity is,[3] and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also sets out the reporting entity concept.  Paragraph 41 of SAC 1 states that "Reporting entities shall prepare general purpose financial reports." [4]  In relation to a group, SAC 1 states in paragraph 17 that "the group, which may be termed an economic entity, will be a reporting entity where there exist users dependent on general purpose financial reports for making and evaluating resource allocation decisions regarding the collective operations of the group of entities".

     BC4               An entity that assesses itself to be a non-reporting entity can therefore prepare special purpose financial statements, which are not necessarily consistent, comparable, transparent or enforceable.  In particular, special purpose financial statements do not always comply with the recognition and measurement requirements[5] in Australian Accounting Standards and nor do they always disclose that fact.  The Board is aware of the view of some, that this situation is acceptable because, by inference, users of special purpose financial statements can demand any information they need.  However, the Board has received feedback that in practice that is often not the case.  The Board determined that users should be provided with adequate information to enable them to confidently assess an entity's level of compliance with the recognition and measurement requirements in Australian Accounting Standards in special purpose financial statements or be alerted to areas where this has not been assessed, and is therefore unclear.  Such disclosures are expected to better support users in identifying where additional information is required.

     BC5               In developing this Standard, the Board considered the findings of AASB Research Report 11 Review of Special Purpose Financial Statements: Large and Medium Sized Australian Charities and feedback obtained from the not-for-profit private sector regarding the public interest nature of the sector and the needs of financial statement users with regard to the consistency and transparency of special purpose financial statements.

     BC6               The research examining the reporting practices of large and medium charities lodging financial statements with the ACNC in 2016 estimates that approximately 36% of those charities declared that they were preparing special purpose financial statements based on data obtained from the 2016 Annual Information Statements lodged with the ACNC.  It is estimated that, of those charities preparing and lodging special purpose financial statements, approximately 26% state compliance with recognition and measurement requirements in Australian 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