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18RU-004 Special purpose on life-support? – Update

18RU-004 Special purpose on life-support?

We provide a summary of recent developments around the AASB’s plan to simply/change the Australian financial reporting framework.

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Michael Voogt

Director, Department of Professional Practice

KPMG Australia

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The IASB issued a revised Conceptual Framework in March 2018. The AASB has subsequently issued ITC 39 Applying the IASB’s revised conceptual framework and solving the reporting entity and special purpose financial statement problems to deal with the challenges in Australia in adopting the IASB change.

The main issue that the AASB is seeking to address is the removal of the reporting entity concept. This would put an end to the preparation of special purpose financial statements by entities that are required to report to ASIC under the Corporations Act 2001.

The Reporting Update provides a summary of recent developments around the AASB’s plan to simply/change the Australian financial reporting framework. It discusses:

  • recent AASB deliberations on Phase 1 of ITC 39
  • state of play on Phase 2 of ITC 39
  • a government proposal to increase the small/large proprietary company thresholds.

 

“KPMG welcomes consideration of the reporting thresholds. We have recommended consideration by the government for a number of years, as the last revision to the thresholds was in 2007.

We note that the government proposals explanatory statement does not provide any detail around:

  • consideration of whether the three existing benchmarks are still appropriate
  • why doubling the thresholds was considered the most appropriate outcome
  • why consideration was not given to measuring the thresholds over the last two preceding years, instead of the current financial year.

The date of measurement has been a practical issue in Australia for a number of years. Consolidated revenue and consolidated gross assets at the end of a financial year will not be determined until after year end. Measuring the thresholds over the two preceding financial years (like in New Zealand) allows companies to plan financial reporting requirements prior to year end.”

– Michael Voogt
Director, Department of Professional Practice

 

Refer to the Reporting update for further detail.

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