Special purpose Financial Statement Problems Phase 2 (Medium-term Approach).
The AICD does not support the AASB’s preferred Phase 2: Medium-term Approach which involves removing the ability for non-publicly accountable entities to prepare and lodge special purpose financial statements (SPFS) and to instead require general purpose financial statements (GPFS).
We do not consider that the rationale presented in the CP on the problems with SPFS is clear and based on unequivocal evidence. Further, we are concerned that such an expansion of GPFS will be in excess of user needs without adequate analysis of the costs and benefits of the change. The alternatives proposed by the AASB will increase the compliance burden on business by requiring:
- Consolidations and equity accounting;
- Increased complexity in adopting the recognition and measurement of International Financial Reporting Standards (IFRS); and
- Additional disclosures.
The AICD considers that a broader review of the Australian financial reporting regime should be undertaken by exploring both elements – review of ‘who’ needs to lodge financial reports and a review of ‘what’ these entities should be reporting. The AASB proposals attempt to explore the ‘what’ without policy makers addressing the ‘who’. Only a review of these parts together will enable the development of an effective financial reporting regime that will support the economy without imposing unnecessary compliance burden on small business.
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