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A copy of our submission on AASB Invitation to Comment ITC 12 ‘Request for Comment on a Proposed Revised Differential Reporting Regime for Australia and IASB Exposure Draft of A Proposed IFRS for Small and Medium-Sized Entities’ is available for download below.
The paragraphs below answer the following questions:
You can also listen to a podcast where Assurance partner Stephen Gustafson and Accounting Technical partner Melissa Perry discuss the AASB’s proposals. Click here to access the podcast.
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What does the Deloitte submission say?
We generally support the AASB’s preliminary views on the proposed differential reporting regime for Australia, particularly the introduction of an Australian SME Standard.
However, we believe the proposals can be improved, particularly in the following key areas:
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reducing the focus on ‘general purpose financial reports’ and instead realigning the differential reporting regime to apply only to financial reports where the reporting mandate requires compliance with Accounting Standards
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reassessing the ‘dividing line’ between those for-profit entities that would apply Australian equivalents to IFRSs and those entities that would apply an Australian SME Standard, preferably based purely on the IASB’s concept of ‘public accountability’
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providing presentation and disclosure relief for entities where the costs of complying with the presentation and disclosure requirements of the full suite of IFRS or IFRS for SMEs exceeds the benefits of compliance – this particularly applies to subsidiaries and smaller entities that lack economic significance and/or do not have widespread interest in their financial reports
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simplifying the proposals as they apply to not-for-profit and public sector entities so that financial reporting for these classes of entities is based on only one, and not both, of the suites of Standards (i.e. A-IFRS or the Australian SME Standard, not both).
Appendix A to our submission (downloadable below) presents our revised proposal in a graphical flowchart format.
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In summary terms, what are the AASB’s proposals?
The AASB’s proposals would eliminate the ‘reporting entity’ concept and replace it with a two-tiered financial reporting framework based on IFRS and the forthcoming ‘IFRS for SMEs’ Standard.
The effect of these changes is that all financial reports lodged with a regulator, or those which are available to the public at large, would be considered ‘general purpose financial statements’ and so be required to fully comply will all the requirements of the relevant reporting framework, either A-IFRS or an Australian SME Standard.
These requirements would also apply to entities reporting under the Corporations Act 2001 that are exempted from filing their financial report with ASIC.
All entities that have ‘public accountability’ (listed entities, banks, insurance companies and so on) would be required to comply with A-IFRS, as would other entities that exceed a ‘size test’. The ‘size test’ applied would depend on the nature of the entity – either a for-profit, not-for-profit or public sector entity.
More information about the AASB proposals can be found in Accounting alert 2007/10.
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Which entities would be most affected by the proposals?
Entities will be most affected by the proposals if they were implemented in their current form include:
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subsidiaries that currently prepare special purpose financial reports
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entities that lodge their financial reports with a regulator or make their financial statements available to the public at large and which currently prepare special purpose financial reports
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reporting entities that fall under the AASB’s thresholds and so might apply an Australian SME Standard – which offers some relief from recognition, measurement, presentation and disclosure requirements of ‘full’ IFRS
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entities reporting under the Corporations Act 2001 that are exempted from filing their financial reports with ASIC.
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Where can I find more information?
To learn more about the AASB and IASB proposals, see the following:
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Invitation to Comment ITC 12 'A Proposed Revised Differential Reporting Regime for Australia and the IASB Exposure Draft of a
Proposed IFRS for Small and Medium-sized Entities' (PDF 1714kb)– as issued by the AASB in May 2007
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Accounting alert 2007/10 May 2007 AASB meeting highlights – discusses the AASB’s proposals in more detail and provides links to previous AASB discussions
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Accounting alert 2007/03 IASB offers relief for SMEs – overview of the IASB’s exposure draft of ‘IFRS for SMEs’ and our initial analysis of the proposals from the Australian perspective
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