AASB plans revolutionary changes to June 2010 financial reporting

The Australian Accounting Standards Board (AASB) intends to release a Consultative  Paper before the end of the year that proposes a new Differential Reporting accounting standard that can be applied for 30 June 2010 financial statements. This would impact non-listed companies, some Government organisations and not-for-profit entities (Non-Publicly Accountable entities, or NPAs).

In a radical departure from the existing reporting entity model, the AASB is proposing to deem all companies required to prepare Corporations Act financial statements to be reporting entities. Those financial statements will be required to apply all of the Recognition and Measurement (R&M) rules in full IFRS and Australian accounting standards. No longer will it be sufficient for non-reporting entity companies to just follow the three AASB disclosure standards (AASB 101 Presentation, AASB 107 Cash Flow and AASB 108 Accounting Polices) and AASB 1031 Materiality.

In addition to the full IFRS R&M rules, the AASB will prescribe the International Accounting Standards Board’s (IASB) IFRS for SMEs disclosure provisions with additional AASB specific disclosures that it believes are relevant to a full IFRS R&M model.

Unlike many other countries, the AASB believes that the IASB’s IFRS for SMEs simplified R&M and disclosures accounting standard should not be available as an option for the non-listed sector. In countries such as the United Kingdom, the United States, South Africa, much of Asia and it is believed, in time, New Zealand, IFRS for SMEs will be an option that can be adopted instead of full IFRS or local simplified accounting regimes.

Grant Thornton believes that current NPA reporting entities should have the option to be able to enjoy the benefit of a simplified accounting standard model that has been significantly designed for them, instead of continuing with the ongoing complexity of full IFRS R&M.

In addition, it is Grant Thornton’s view that non-reporting entities should not be forced to adopt the full IFRS accounting model that the IASB has specifically rejected for NPAs. Grant Thornton believes that the AASB should seek input on whether the IFRS for SMEs model is appropriate for current non-reporting entities after a two year period of experience with Australian entities. It may be that the step up to IFRS for SMEs does not pass a cost/benefit test, but there is little doubt in Grant Thornton’s mind that the step up to, or continuation of, full IFRS R&M for NPA reporting entities is contrary to both Australia’s commitment to the International Accounting Standards regime (IFRS and IFRS for SMEs) and the Government’s red tape and compliance costs reduction policy.

Once the Consultative Paper is issued, there will be a three month consultation process and it will be important that submissions are made to the AASB. Grant Thornton will be encouraging our clients and other key constituents to make submissions.

Should you have any questions regarding the AASB’s changes to June 2010 financial statements, please contact your usual Grant Thornton advisor.
 
Author: Keith Reilly, November 2009

Want advice or more information on this topic?
Click here to contact the author

Alternatively, phone Keith Reilly directly
T +61 2 8297 2400