What you need to know for 30 June 2010 financial statements

No more parent company financial statements
Corporate Reporting Reform Act was passed by Parliament by 24 June 2010 and received Royal Assent on 28 June 2010. The Bill abolishes the requirement to prepare and publish parent financial statements where consolidated financial statements are required to be prepared. However some limited parent company financial information is required to be disclosed. Further details are available on the Grant Thornton website and can be accessed by clicking here.

Simplifications for the smaller limited by guarantee companies
Changes to the Corporations Act covering the not-for-profit industry will mean that smaller not-for-profits that do not have tax deductibility status (no tax deductions for donations) will no longer be required to prepare Corporations Act financial statements if their revenues are less than $250,000 per year. Limited by guarantee companies that have revenues over that limit but below $1,000,000 will now have the option of implementing a potentially cheaper audit review instead of an audit. All other limited by guarantee companies can now adopt a much more simplified (streamlined) director’s report. Unfortunately, in our view, real simplified accounting reform has been limited to the AASB’s Reduced Disclosure Regime (RDR) rather than the implementation of IFRS for SMEs. More details can be found by clicking here to access our TA Alert on this issue. 

These simplifications are dependent upon passage of the Corporate Reporting Reform Bill. The latest updates can be found by clicking here.

IFRS compliance statement required in the Director’s Declaration where applicable
A minor Corporations Act amendment is the new requirement to state in the Director’s Declaration where there has been compliance with all of the Australian accounting standards that results in IFRS compliance. An ‘explicit and unreserved statement of compliance with IFRS has been included in the notes to the financial statements’ is required. This applies to all listed companies and any other reporting entities unless the Reduced Disclosures Regime (RDR) accounting standard is chosen.

Reduced disclosures but no major simplifications  in accounting
Like the Government, the Australian Accounting Standards Board (AASB) has been working to bring some joy to 30 June balancers who are not publicly accountable (i.e. mainly non-listed companies) with their proposal to reduce disclosure of financial statements notes by what is claimed to be up to 50% compared to full IFRS/AASB accounting standards. The most significant reductions are in the following accounting standards:

• AASB 7 Financial Instruments; Disclosures
• AASB 101 Presentation of Financial Statements
• AASB 108 Accounting Policies
• AASB 123 Borrowing Costs
• AASB 124 Related Party Disclosures
• AASB 128 Investments in Associates

The AASB has not really followed the philosophy contained in the International Accounting Standards Board’s (IASB) IFRS for SMEs accounting standard. It has rejected the significant simplifications in recognition and measurement particularly the complex fair value computations, and instead recommended more rather than less disclosures compared to either the IFRS for SMEs accounting standard (which their standard is based upon) or the existing AASB specific disclosures that apply to non-reporting entities. This will provide some relief for non-listed reporting entities, but the RDR accounting standard is unlikely to be adopted by non-reporting entities that already have much simpler disclosures at this time. However, all is not lost for IFRS for SMEs, with attention now at the Parliamentary level!
Details of the reduced disclosures are available on the AASB’s website which you can access by clicking here.

A summary of the major reductions is contained in TA Alert 2010-15 Reduced Disclosure Regime. The whole suite of RDR standards is expected to be published by the AASB around 30 June 2010 and the latest updates can be found on the Grant Thornton website which you can access by clicking here or on the AASB’s website.

What’s New for 2010 financial statements
After all of the excitement of the Corporate Reporting Reform Bill and the AASB’s RDR accounting standard, one can lose sight of some other substantial changes to accounting standards. These are detailed in our TA Alert 2010-09 What's new for June 2010.
New requirements in AASB 101 include:

• the change to an comprehensive income model and the requirement in certain instances of a third balance sheet (not for RDR entities though)
• AASB 8 Operating Segments ‘looking through the eyes of management’ disclosures
• AASB 123  Borrowing Costs capitalization
• more complications in AASB 7 Financial Instruments; Disclosures (but again not for RDR companies or non-reporting  entities)

Standards issued but not yet effective disclosures
As usual entities need to consider the range of disclosures in their financial statements for accounting standards that have been issued, but which have not been adopted as they are not yet effective.

TA Alert 2010-08 Standards not yet effective - June 2010 provides further details and some standard paragraph disclosures that should be tailored. However for RDR entities, this is no longer a disclosure requirement.

For more information on the 30 June financial statements, contact your usual Grant Thornton advisor or the author of this article.

Author, Keith Reilly, June 2010

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