Our joint submission to AASB ED 297 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities has supported the AASB’s proposals to remove the reporting entity concept for those for-profit entities with lodgement requirements that specify “financial statements in accordance with accounting standards.”  

These entities will mainly be large proprietary and other companies lodging with ASIC, financial services licensees, higher education providers and cooperatives. They represent a narrowly targeted group where we believe there is a reasonable user need for lodgement of Tier 2 General Purpose Financial Statements (GPFS) that comply with the recognition and measurement requirements of Australian Accounting Standards. 

The ED 297 proposals are therefore a significant improvement over earlier proposals concerning the removal of the reporting entity concept and reflect member concerns (expressed in our special purpose survey) about the need to ensure that financial reporting reform is carefully targeted to ensure benefits outweigh costs.

However, our submission does not support the mandatory effective date of June 2021. We believe that the transition timetable should not be accelerated ahead of what preparers would normally have available for reforms of this nature (i.e. 2 years). This is due to the complexity and impact of these reforms and their interaction with other aspects of the as yet incomplete framework reform in the not-for-profit sector. Nevertheless, it does acknowledge that the reforms should be available for early adoption from June 2020 and argues that the substantial implementation concessions that ED 297 is providing to incentivise early adoption, should sunset for those entities choosing delayed implementation.  

The submission also considered the AASB’s associated disclosure reduction proposals for Tier 2 GPFS contained in ED 295 and has generally supported those proposals, provided they too are subject to a two-year implementation window.