With the International Accounting Standards Board (IASB) recently amending the Conceptual Framework for Financial Reporting, the AASB is proposing changes to maintain harmonisation with IFRS.
The proposed changes include effectively removing the option to prepare special purpose financial statements, with the AASB proposing two general purpose financial statement Tier 2 alternatives.
The first includes the existing Tier 2, consisting of reduced disclosure requirements (RDR), with the second being a new Tier 2 Specified Disclosure Requirements (SDR) that will see full recognition and measurement with specified disclosures from some accounting standards.
Speaking to Accountants Daily, RSM national tax director, Ralph Martin believes the AASB should not move away from the current RDR framework that has been adopted by a number of companies since its introduction in 2010.
“To put it bluntly, it is about not reinventing the wheel here. The AASB has had a framework that it thinks is appropriate for medium sized companies that file on public record and that's worked fine so for those companies that have adopted it, why are we disadvantaging them by making them change it?,” said Mr Martin.
“The RDR have been adopted by New Zealand as well and that's the result of the policy of the two governments trying as far as possible to create regulatory alignment and a single market to make it easier for entities to do business in both Australia and New Zealand.
“For them to move away from that, it would seem to be inconsistent with what the two governments are trying to achieve in increasing regulatory alignment between the two countries.”
With the AASB currently consulting on both alternatives, Mr Martin believes stakeholders would be mistaken to support the SDR framework on the basis of having to supply fewer disclosures.
“My view and RSM’s view may be in the minority but it seems like people may be solely looking at the volume of disclosure and are plumping for the option they will think have less disclosure without thinking of what exactly is being required here – is it suitable, is it appropriate, and how difficult is it to prepare the disclosures,” said Mr Martin.
“The sense I’m getting from discussions is that people are looking for the option that will end up with the shortest set of financial statements and perhaps that's not quite the right way to look at it, we should be looking at what information is included, how difficult is it to prepare that information because you have to consider the cost and regulatory burden, but also how relevant is it to users.”
“Of the two options, the RDR option is the one that meets that better.”
AASB chair Kris Peach previously spoke to Accountants Daily on its proposed changes and how recent concerns over the cost-benefit of implementing these changes were misplaced, considering the small fraction of entities likely to be impacted.