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Options for replacing Special Purpose Briefing sessions

These briefing sessions opened the AASB’s consultation on how to introduce in Australia the recently issued IASB’s revised Conceptual Framework and its effect on financial reporting requirements.

The AASB Consultation Paper discusses the problems of the new IASB’s reporting entity definition and special purpose financial statements in Australia. It includes the different options considered by the AASB to address these problems, including the AASB’s preferred option to resolve them.

The briefing sessions addressed each matter listed below and provided stakeholders with the opportunity to interact and clarify the issues.

This summary document outlines the feedback received during these sessions.

The 'reporting entity' issue

The IASB's revised Conceptual Framework includes a definition of 'reporting entity' that conflicts with the reporting entity concept used in Australian Accounting requirements to determine when an entity should prepare general purpose financial statements. This conflict must be resolved to avoid confusion, non-compliance with IFRS and potential liability for directors. 

The AASB proposes to:

  1. make the revised Conceptual Framework applicable to all entities required to prepare financial statements in accordance with Australian Accounting Standards
  2. remove the current definition of reporting entity from Australian Accounting requirements, effectively removing the option to prepare special purpose financial statements, if entities are required by legislation or otherwise to comply with Australian Accounting Standards
  3. provide an alternative Tier 2 general purpose financial statement framework 'Specified Disclosure Requirements' that requires only four incremental disclosures to those currently required under current ASIC regulatory guidance for entities preparing special purpose financial statements.

This would have important consequences for some entities, effectively removing the option to prepare special purpose financial statements (if they are required by legislation or otherwise to comply with AAS).

These proposals are discussed in the AASB Consultation Paper: Applying the IASB’s Revised Conceptual Framework and Solving the Reporting Entity and Special Purpose Financial Statement Problems.