New Conceptual Framework. End of special purpose financial statements for corporates? 29 May 2018

Transcription

1 New Conceptual Framework End of special purpose financial statements for corporates? 29 May 2018

2 Conceptual Framework for Financial Reporting? 2

3 IASB Conceptual Framework

4 What is the Conceptual Framework? A practical tool that assists Board to develop Standards Preparers to develop consistent accounting policies All to understand and interpret Standards Addresses fundamental issues What is the objective of financial reporting? What makes financial information useful? What are assets, liabilities, equity, income and expenses, when should they be recognised and how should they be measured, presented and disclosed? 4

5 Conceptual Framework at a glance Object of financial reporting Qualitative characteristics of useful financial information Description of the reporting entity and its boundary Definitions of an asset, a liability, equity, income and expenses Criteria for including assets and liabilities in the financial statements (recognition) Guidance on when to remove assets and liabilities (derecognition) Measurement bases and guidance on when to use them Concepts and guidance on presentation and disclosure 5

6 Why was the Conceptual Framework revised? Previous version of Conceptual Framework useful but some improvements needed incomplete out of date unclear Main improvements Filled in the gaps, for example, concepts on measurement and presentation and disclosure, including guidance on the use of profit or loss and OCI Updated, for example, the definitions of an asset and a liability and recognition criteria Clarified, for example, the roles of stewardship and prudence in financial reporting 6

7 Conceptual Framework at a glance New Measurement Presentation and disclosure Derecognition Concepts on measurement, including factors to be considered when selecting a measurement basis Concepts on presentation and disclosure, including when to classify income and expenses in other comprehensive income Guidance on when assets and liabilities are removed from financial statements Updated Definitions Recognition Definitions of an asset and a liability Criteria for including assets and liabilities in financial statements Clarified Prudence Stewardship Measurement uncertainty Substance over form 7

8 Impacts and challenges Practical ability - liabilities Bundles of assets Controlbased approach - derecognition 8

9 Applying IASB Conceptual Framework in Australia

10 New reporting entity definition IASB RCF Boundary an entity required, or chooses, to prepare financial statements can be a single entity/ portion of an entity/ comprise > 1 entity not necessarily a legal entity AASB SAC 1 an entity that is required to prepare general purpose financial statements Users Inconsistency between the two definitions could result in misinterpretation, the wrong application of AABSs or non-compliance with IFRS 10

11 Special purpose financial statements 55%-60% of accounts lodged with ASIC are Special purpose! Total Public company - limited by guarantee Unlisted public companies Small companies Foreign companies Large companies 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% GPFS SPFS Extract from AASB Research Report No. 1 (2014) 11

12 Special purpose to general purpose why bother? Benefits of transition Costs of transition 12

13 So what is off the table? Small vs Large test Private grand fathered companies Other entities Private trusts 13

14 Two-phased approach

15 Two-phased approach Ideally not more than 2 years between the two * RCF = IASB Revised Conceptual Framework Phase 1: Two Conceptual frameworks Phase 2: One Conceptual framework RCF* Publicly accountable for-profit entities + entities voluntarily reporting compliance with IFRS i.e. GPFS Tier 1 Apply RCF* (that includes new definition of reporting entity ) All other entities i.e. GPFS Tier 2 and SPFS Continue to apply existing Framework 1 (that includes the Australian reporting entity concept) Publicly accountable GPFS Tier 1 Not publicly accountable GPFS Reduced Disclosure Requirements (RDR): existing Tier 2 OR GPFS Specified Disclosure Requirements (SDR): new Tier 2 1 Framework for the Preparation and Presentation of Financial Statements (June 2014) 15

16 Phase 2: RDR versus SDR Recognition and measurement of all standards Reduced disclosures RDR Reduced disclosures for all standards Existing Tier 2 Specified disclosures SDR All disclosures for specified standards AASB 101 Presentation of Financial Statements AASB 107 Statement of Cash Flows AASB 108 Accounting policies, changes in Accounting Estimates and Errors Impairment of assets AASB 1054 Australian Additional Disclosures AASB 1048 Interpretation of Standards Revenue Related party transactions Income taxes 16

17 Phase 2: What else? Transitional relief Additional tier(s) Four other options + IFRS for SMEs Exposure Draft Earliest finalisation and application in

18 AASB proposal revised reporting framework Legislation or other requirement requires financial report complying with Australian Accounting Standards No No general purpose financial reporting required Yes Publicly accountable? (or Federal, State, Territory or Local Government) No Tier 2 GPFS Option 1 Existing RDR or Option 2 New SDR Submission due Phase 1 9 August 2018 Yes Phase 2 9 November 2018 Tier 1 GPFS 18

19 Thank you

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