New submission on differential reporting

Date issued: 30 April 2010

CPA Australia and the Institute of Chartered Accountants Australia (ICAA) have lodged a joint response to the Australian Accounting Standards Board’s (AASB) Exposure draft 192 Revised differential reporting frameworks and consultation paper Differential financial reporting – reducing disclosure requirements.

The submission calls for the AASB to make available the International Financial Reporting Standards’ small and medium enterprises standard for use by relevant entities. In the absence of appropriate evidence from the AASB that change is necessary, the submission does not support changes to the reporting entity concept.

CPA Australia and ICAA also conducted independent research to measure two affects of the AASBs proposed reduced disclosure regime (RDR).

The focus of the research was on non-reporting entities with reporting obligations that require the use of Australian Accounting Standards, and currently prepare special purpose financial statements (SPFS) to meet those obligations.

The AASB’s proposal to change the reporting entity concept would mean that those reporting obligations can only be satisfied by the preparation of general purpose financial statements (GPFSs).

The research shows that many large proprietary entities, public companies limited by guarantee companies and other organisations, would incur significant additional costs in the preparation of GPFSs when compared to the cost of SPFSs.

The cost of preparing GPFSs using the proposed RDR framework will often be materially greater than the cost of preparing GPFSs using the IFRS for SME standard.