Accounting alert 2010/05 - May AASB meeting sees AASB proceed with RDR in two stages
RDR likely to be available for early adoption at 30 June 2010
The AASB’s May meeting was a special one-day affair held on Monday 17 May 2010.
The majority of the meeting was devoted to considering the proposed ‘Reduced Disclosure Regime’ (RDR), where the AASB tentatively agreed to a two-stage implementation of the proposed RDR.
What did the AASB agree?
The AASB began its redeliberation of the proposals in ED 192 Revised Differential Reporting Framework. The AASB has listened to constituent concerns about the impacts of the proposed RDR on entities currently preparing special purpose financial statements. As a result, the AASB tentatively agreed to implement its RDR proposals as follows:
- Stage 1. Implement the RDR for those entities currently preparing general purpose financial statements, providing the option of possibility of early adoption at 30 June 2010
- Stage 2. Conduct further research on the potential impact of the RDR proposals on those entities currently preparing special purpose financial statements if they were required to prepare general purpose financial statements under RDR. In the meantime, the reporting entity concept will continue to be used for differential reporting purposes.
The AASB intends to finalise the ‘Stage 1’ proposals in time for their optional early adoption at 30 June 2010. Mandatory application of the proposals would not be required until annual reporting periods beginning on or after 1 July 2013, one year later than the original proposals in ED 192.
The early implementation of the proposed RDR for reporting entities and other entities preparing general purpose financial reports will be welcomed by entities it benefits. It is a ’win win’ outcome because the downside in terms of additional disclosures included in the original proposals are effectively deferred, and may not be implemented at all, or in the way originally proposed in ED 192.
It is now possible the existing ‘reporting entity concept’ for differential reporting could be retained, or possibly, a ‘third tier’ of reporting requirements might again be considered by the AASB. However, the AASB remains strongly opposed to implementing the IFRS for SMEs in Australia at this time, so it may be unlikely this option will be considered again in the short term. The AASB indicated its intention to monitor IFRS for SMEs developments and help shape changes to make it more relevant to Australia’s needs.
How will entities be affected?
The following table summarises the impact on various classes of entity:
|Class of entity||Impact|
|For-profit reporting entities with public accountability*
(e.g. listed entities, disclosing entities, banks, insurance companies and other financial institutions)
|No change. These entities will continue to prepare general purpose financial statements that fully comply with IFRS, including all recognition, measurement, presentation and disclosure requirements (as per the original proposals in ED 192).|
|Other for-profit reporting entities preparing general purpose financial statements but lacking ‘public accountability’*||Reduced disclosure. Able to take advantage of the RDR, with the strong possibility of early adoption from 30 June 2010.|
|Non-reporting entities currently preparing special purpose financial statements, including wholly-owned subsidiaries and eligible large proprietary companies||No change at this stage. These entities will still be able to prepare special purpose financial statements where considered appropriate, until such time as the AASB undertakes further research and determines the way forward for these entities.|
|Federal, State, Territory and Local governments#||No change. These entities will continue to prepare general purpose financial statements that fully comply with all Accounting Standards (including IFRS as modified for the public sector entities), including all recognition, measurement, presentation and disclosure requirements.|
|Other not-for-profit entities||Reduced disclosure. Able to take advantage of the RDR, strong possibility of early adoption from 30 June 2010|
* For more information about which entities are considered ‘publicly accountable’, see Accounting alert 2010/02. It is understood at the May meeting the AASB agreed to consider additional guidance on how the ‘publicly accountable’ concept will be applied in the Australian context and also confirmed the nature of entities ‘deemed’ to have public accountability (e.g. disclosing entities).
# ED 192 also proposed to include universities in the full IFRS (‘Tier 1’) requirements. The AASB has decided to exclude such entities from mandatory compliance with Tier 1 and they may be eligible to apply the RDR if permitted by their reporting mandate.
Where to from here?
The AASB will continue redeliberating the ED 192 proposals at its June meeting, with a view to finalising the ‘stage 1’ proposals in time for early adoption at 30 June 2010.
|Past experience has shown major Accounting Standard changes are rarely finalised in extremely short timeframes. Accordingly the AASB may be required to call another special meeting to finalise the proposals, or even continue debate at the July meeting, particularly if unforeseen issues arise out of the redeliberation process. Entities hoping to early adopt the proposals to reduce their disclosure burden at 30 June 2010 should monitor developments carefully and put contingency plans in place in case early adoption is not possible.|
The next meeting of the AASB is scheduled for 9-10 June 2010 in Melbourne.