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Australia

Financial reporting framework in Australia


The 'reporting entity' concept

Reporting entities must comply with Australian Accounting Standards and Interpretations, as issued by the Australian Accounting Standards Board (AASB), and, where applicable, with the requirements of Corporations Act 2001.

A reporting entity is 'an entity in respect of which it is reasonable to expect the existence of users who rely on the entity's general purpose financial statement for information that will be useful to them for making and evaluating decisions about the allocation of resources. A reporting entity can be a single entity or a group comprising a parent and all of its subsidiaries.'


Australian Accounting Standards Board (AASB)

The AASB is an agency of the Australian Government. AASB standards are known as Australian Accounting Standards and include Australian equivalents to International Financial Reporting Standards (IFRSs). When it first began adopting IFRSs as Australian Accounting Standards, the AASB made some modifications to IFRSs, including removing some options and adding some disclosures. In 2007, the AASB modified Australian Accounting Standards so that their requirements are identical to IFRSs as issued by the IASB for for-profit entities. Some additional disclosures were retained and some non-IFRS compliant requirements apply for not-for-profit and public sector entities.


Compliance with IFRSs

The basis of preparation note to the financial statements defines the reporting framework as 'Australian Accounting Standards'.  That note goes on to say that compliance with Australian Accounting Standards ensures the financial statements and notes of the entity comply with International Financial Reporting Standards (IFRS).

The auditor's opinion refers to compliance with Australian Accounting Standards. The auditor's report also notes that 'in note xx, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements and notes comply with International Financial Reporting Standards'. The audit opinion itself notes 'the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note xx'.

From 30 June 2010, the directors declaration accompanying the financial statements of companies and other entities regulated by the Corporations Act 2001 is required to include an additional statement referring to the explicit and unreserved statement of compliance with International Financial Reporting Standards in the notes to the financial statements (where such a statement is made).


Reduced Disclosure Requirements (RDR)

Under a new differential reporting regime released by the Australian Accounting Standards Board (AASB) in July 2010, eligible entities can elect to adopt the 'Reduced Disclosure Requirements' (RDR). Entities with public accountability cannot adopt the RDR, but must comply with Australian Accounting Standards in full (and state compliance with IFRS).

The RDR requires entities to follow the recognition and measurement requirements of all Australian Accounting Standards (which are equivalent to IFRSs), but with reduced disclosure requirements.

The new requirements apply to annual reporting periods beginning on or after 1 July 2013, but may be early adopted for annual financial reporting periods beginning on or after 1 July 2009.

Related news

  • AASB essay on the Australian 'reporting entity concept'

  • Apr 04, 2014

  • The Australian Accounting Standards Board (AASB) has released an essay published by its AASB Research Centre, which explores the role of the 'reporting entity concept' in Australia's differential reporting regime.

  • ASX updates corporate governance guidelines to expand sustainability reporting

  • Mar 28, 2014

  • The Corporate Governance Council of the ASX Group, one of the stock exchanges of Australia, has released an updated edition of its 'Corporate Governance Principles and Recommendations', which outline the principles and recommendations about corporate governance practices that a ASX listed entity must meet on a "comply or explain" basis. The revised guidelines include enhanced recommendations for disclosure of material exposures to economic, environmental and social sustainability risks, including how those risks are managed.

  • Australia seeks to finesse its differential reporting regime in light of IFRS 1 changes

  • Mar 19, 2014

  • The Australian Accounting Standards Board (AASB) has issued an exposure draft, and accompanying research paper, discussing the implications for entities moving between different 'tiers' of its differential reporting regime in light of changes made by the International Accounting Standards Board (IASB) to permit the repeated application of IFRS 1 'First-time Adoption of International Financial Reporting Standards'.

  • AASB believes the IFRS for SMEs should be updated in line with full IFRSs

  • Mar 13, 2014

  • The Australian Accounting Standards Board (AASB) has submitted a comment letter on the IASB’s Exposure Draft ED/2013/9 ‘Proposed amendments to International Financial Reporting Standard for Small and Medium-sized Entities’. In the letter the AASB expresses disappointment that the review of the standard has not been as comprehensive as hoped.

  • AASB paper on materiality in disclosure

  • Feb 28, 2014

  • The Australian Accounting Standard Board (AASB) has published a staff paper on materiality in the context of disclosure. The paper considers the 'disclosure overload' criticism often levelled at International Financial Reporting Standards, and provides a series of recommendations for preparers to consider in the short-term.

  • Australian guide to environmental accounting

  • Jan 24, 2014

  • The Australian Bureau of Meteorology (BOM) has published a guide on environmental accounting. The guide describes the purpose, design and implementation of environmental accounts, which are designed to provide a structured and standardised way to organise environmental information for policy and decision-making needs.

  • Australian regulator extends interim relief for stapled entities

  • Jan 22, 2014

  • The Australian Securities and Investments Commission (ASIC) has issued updates to its previous 'class orders' to permit stapled entities to continue to present consolidated or combined financial statements until such time as the IFRS Interpretations Committee can consider issues surrounding the application of IFRS 3 'Business Combinations' and IFRS 10 'Consolidated Financial Statements' in the context of stapled entities.

  • AASB update for December 2013

  • Dec 20, 2013

  • A summary of developments related to the Australian Accounting Standards Board (AASB) during the month of December 2013. Includes highlights from the December AASB meeting, new AASB appointments, and new and revised pronouncements.

  • Australian regulator outlines findings from its June 2013 financial statement reviews

  • Dec 18, 2013

  • The Australian Securities and Investments Commission (ASIC) has released the findings of its reviews of June 2013 financial reports. Of a review of the financial statements of 280 listed and other entities of public interest, ASIC made enquiries of 70 entities on 100 matters, and this so far has resulted in eleven entities making material restatements or agreeing to provide additional material disclosures.

  • Agenda for the November 2013 AOSSG meeting

  • Nov 25, 2013

  • An agenda has been released for the fifth meeting of the Asian-Oceanian Standards Setters Group (AOSSG), which is being held in Colombo, Sri Lanka on 27-28 November 2013. Representatives from many of the 26 countries which are currently members of AOSSG will attend the meeting, as will representatives from the International Accounting Standards Board (IASB). The meeting will include discussion on a number of IASB projects, consider the results of a survey conducted by the AOSSG on accounting and Islamic finance in the Middle East and North Africa, receive feedback on the IFRS implementation efforts and regional capacity building, and consider ongoing membership and process requirements.

  • AASB issues guidance on consolidation in the not-for-profit sector

  • Nov 18, 2013

  • The Australian Accounting Standards Board (AASB) has released an Amending Standard that provides implementation guidance for not-for-profit entities under the Australian equivalents to IFRS 10 'Consolidated Financial Statements' (AASB 10) and IFRS 12 'Disclosure of Interests in Other Entities' (AASB 12). The guidance explains and illustrates how not-for-profit and public sector entities can apply the key concepts of 'control' and 'structured entities' arising under those standards, particularly where circumstances from a for-profit perspective do not readily translate to a not-for-profit perspective.

  • Trans-Tasman professional accounting body approved by members

  • Nov 01, 2013

  • The members of the Institute of Chartered Accountants Australia (ICAA) and the New Zealand Institute of Chartered Accountants (NZICA) have voted to approve a proposal to merge the two bodies. The new body, to be called 'Chartered Accountants Australia and New Zealand' is expected to be formally constituted by April 2014 and will have over 90,000 members, and a further 17,000 provisional members.

  • AASB October 2013 update

  • Nov 01, 2013

  • A summary of certain developments related to the Australian Accounting Standards Board (AASB) during the month of October 2013. Focuses on highlights from the AASB's October meeting, the availability of new compiled standards and other pronouncements, and the publication of an updated AASB work plan.

  • Australian regulator outlines December 2013 focus areas

  • Oct 30, 2013

  • The Australian Securities and Investments Commission (ASIC) has released its areas of focus for 31 December 2013 financial reports. The focus areas are largely consistent with prior periods, but include a new focus area on tax accounting.

  • AASB paper discusses accounting for liabilities

  • Oct 15, 2013

  • The Australian Accounting Standards Board (AASB) has published a paper providing a conceptual analysis of the principal issues concerning the financial reporting of liabilities. The paper advocates a broad definition of 'liabilities', that liabilities be recognised on the basis of meeting the definition alone rather than separate recognition criteria, and that liabilities be measured at current value measurement on initial recognition and in most cases in subsequent periods.

  • ASIC commissioner comments on the ongoing relationship between companies and shareholders

  • Sep 13, 2013

  • Mr John Price, Commissioner of the Australian Securities and Investments Commission (ASIC) has given a speech to the Pacioli Society and the Accounting Foundation of the University of Sydney discussing the ongoing relationship between a company and its shareholders. In the speech, one of the items on which Mr Price focused was annual reporting by listed companies, in which he notes many suggestions for improving the usefulness of annual reports.

  • AASB essay on presentation and disclosure

  • Aug 14, 2013

  • The Australian Accounting Standards Board (AASB) has published an essay discussing disclosure and presentation in the context of conceptual frameworks. The essay argues there is a "gap" in frameworks between the objective level and the lower levels, due to an insufficient exploration of the connection between users' needs and the characteristics of the entity. The essay suggests a possible broader focus on 'stocks' and 'flows' and a resultant new approach to presentation and disclosure which would move away from topic based disclosure.

  • Australia adopts investment entities amendments

  • Aug 14, 2013

  • The Australian Accounting Standards Board (AASB) has issued an Amending Standard which implements the International Accounting Standards Board's 'Investment Entities' amendments in the Australian context. The issue of the Amending Standard follows a long debate about the investment entities amendments in Australia, with divergent views being expressed, including the possibility of not adopting the amendments at all. However, the final Amending Standard adopts the IASB's amendments without modification and represents a change from original proposals which may have required additional Australian disclosures requiring consolidated financial information to be included in Australian financial reports.

  • Australian standard setter updates guidance on carbon accounting in light of IFRIC 21

  • Jul 30, 2013

  • The Australian Accounting Standards Board (AASB) has released an updated version of a staff paper on accounting for Australia's carbon pricing mechanism, specifically how to account for the 'fixed price' phase which is often referred to as a 'carbon tax'. The latest update of the paper discusses the implications of the release of AASB Interpretation 21 'Levies' (equivalent to IFRIC 21), and notes a number of interpretative issues surrounding the identification of the obligating event for the carbon tax.

  • Highlights from the July 2013 AASB meeting

  • Jul 22, 2013

  • The Australian Accounting Standards Board (AASB) has released its 'Action Alert' from its meeting in Melbourne on 17-18 July 2013. Highlights of the meeting discussions include concerns with the IASB's proposals on regulatory deferral accounts and employee contributions to defined benefit plans, consideration of the significant implications possible from the IASB's insurance proposals, and consideration of the implications of IFRIC 21 'Levies' in the Australian context (including the carbon pricing mechanism and state payroll taxes).

  • AASB releases updated compiled standards

  • Jun 05, 2013

  • The Australian Accounting Standards Board (AASB) has announced the availability of an initial batch of various 'compiled' standards that apply for annual reporting periods beginning on or after 1 January 2013.

  • May AASB meeting sees tentative agreement to implement investment entities amendments

  • May 31, 2013

  • The Australian Accounting Standards Board met on 28-29 May 2013. The Action Alert from the meeting has been released, and indicates that the AASB has tentatively decided to implement the IASB's investment entities amendments in the Australian context, without additional Australian disclosures. This position is different to the position put forward in an Australian-specific exposure draft published in December 2012.