ASIC is on-board with changes to Special Purpose Financial Reports
The Australian Accounting Standards Board (AASB) is currently undergoing a consultation process which will see significant changes to Special Purpose Financial Reports (SPFR) as we know it.
Today we see a variety of SPFRs. Some SPFRs comply with the recognition and measurement principles of Australian Accounting Standards while others are prepared on a different basis such as modified accruals, which is not a specified framework.
Recent changes by the International Accounting Standards Board (IASB) to the Conceptual Framework will impact the definition of a reporting entity in Australia. If the AASB adopts the Revised Conceptual Framework (RCF) as issued by the IASB, all entities that are required by legislation to prepare a financial report will be required to prepare a General Purpose Financial Report (GPFR). This includes every company that currently lodges a financial report with the Australian Securities and Investments Commission (ASIC) and entities that are required to lodge a financial report with the Australian Charities and Not-for-profits Commission (ACNC).
The AASB is proposing a two-phase process to adopt the RCF. At its recent board meeting in September 2018, the AASB approved the first phase to go ahead. In the short-term, the AASB will operate two conceptual frameworks to maintain IFRS compliance, where the new RCF will apply to all for-profit publicly accountable entities, or entities which are stating IFRS compliance. There is no significant impact to these entities as they are already preparing GPFRs and all other entities can continue preparing SPSF.
Furthermore, the AASB decided to limit the phase two consultation to for-profit entities and conduct separate research on the impacts to the not-for-profit industry.
In September, ASIC announced their support of the proposals by the AASB stating the following:
“ASIC fully supports the consultation to remove special purpose financial statements for entities regulated by ASIC and remove the subjective ‘reporting entity’ test under SAC 1 facilitating a comparable, consistent and transparent framework for preparation of financial statements in Australia.”
This comes as no surprise as the self-assessment for entities, as well as the varying basis of preparation of SPFRs, has been a concern of ASIC for a number of years.
The AASB are currently seeking comments on Phase two of the project. Comments are due by 9 November 2018. We encourage all those affected to provide comments to AASB directly or to us for inclusion in our submission to the AASB.