Differential Reporting - AASB Exposure Draft closes for comment on 23 April 2010 - make your views known to the AASB now
On 26 February 2010, the Australian Accounting Standards Board (AASB) released its long-awaited Differential Reporting Exposure Draft ED 192 Revised Differential Reporting Framework, and an updated Consultation Paper. Submissions close on Friday 23 April 2010. A copy of ED 192 is on the AASB's website, which you can access by clicking here.
The AASB is proposing that entities that are Non-Publicly Accountable (NPAs) - defined as being other than listed companies, disclosing entities, debenture issuing cooperatives, registered managed investment schemes, APRA regulated superannuation plans, or authorised deposit taking institutions - will be able to adopt a Reduced Disclosure Regime (RDR). The RDR could be adopted for 30 June 2010 balance dates, although it is purely optional and the full IFRS disclosure provisions remain in place.
Whilst the AASB has not quantified the benefit to businesses of ED 192, it does state that it will substantially reduce costs of preparing financial statements. In Grant Thornton's opinion the AASB could provide far more potential cost savings by allowing businesses the option of adopting the International Accounting Standards Board’s (IASB’s) IFRS for SMEs which has further disclosure relief and simplified recognition and measurement requirements. This is a view supported by the ICAA, CPA Australia and the NIA in a New Zealand submission on differential reporting.
Non-reporting companies will need to report
The AASB has also stated that any company that lodges financial statements with ASIC will now be a reporting entity and hence required to follow the recognition and measurement requirements of full IFRS. This will significantly increase the cost and complexity of financial statements for what are currently non-reporting entities. This makes little sense given that the IASB has clearly stated that full IFRS is generally only relevant to the listed market (NPAs), and IFRS for SMEs is much more suited to reporting entities. Grant Thornton believes that non-reporting entities at this time should also have the option of adopting the IFRS for SMEs accounting standard, or stay with their existing accounting requirements. The proposed application date is financial periods commencing as from 1 July 2012 (typically 30 June 2013 balance dates).
IFRS for SMEs
ED 192 rejects the IASB's IFRS for SMEs which the IASB has specifically designed for NPAs. Still this is not a done deal as the AASB explains in ED 192: "However, it must be stressed that the AASB is open to alternative views. If the consultation process leads to an alternative approach, it may be that more due process will be needed and a different time scale adopted." (para 7 ED 192).
Grant Thornton position
Grant Thornton lodged a submission with the AASB on its 4 December 2009 Consultation Paper to make the AASB aware of the strong push for IFRS for SMEs as an option for NPAs. Grant Thornton's submission also argued that non-reporting entities should be allowed the option to adopt IFRS for SMEs but not be forced to adopt full IFRS until there was some experience with IFRS in Australia. A copy of Grant Thornton's submission is available by clicking here.
It is important to make the AASB aware of your views on ED 192 by no later than Friday 23 April.
For further information, please contact your usual Grant Thornton advisor or:
National Head of Professional Standards
Grant Thornton Australia