Australian standard setter reveals split views on investment entities

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21 Dec 2012

The Australian Accounting Standards Board (AASB) has released an exposure draft outlining its proposals of how to implement the IASB's investment entities amendments in the Australian context. The exposure draft proposes the use of additional disclosure, but notes "AASB members were split between the... options when considering how best to proceed". The exposure draft outlines two alternate views, including one which could lead to the investment entities amendments not being adopted in Australia.

Consistent with the AASB's prior deliberations, the proposals in the body of Exposure Draft ED 233 Australian Additional Disclosures - Investment Entities would see the issue of the investment entities amendments, together with additional Australian-specific disclosure requirements.

The additional disclosures would require:

  • a consolidated statement of profit or loss and other comprehensive income
  • a consolidated statement of financial position
  • a consolidated statement of changes in equity
  • a consolidated statement of cash flows
  • a summary of the significant accounting policies used in preparing the above consolidated financial statements.

The consolidated financial statements would include controlled investees despite the investment entities exception to consolidation requirements provided in AASB 10 Consolidated Financial Statements (equivalent to IFRS 10).  No exemption from the disclosure requirement would be provided under the AASB's 'reduced disclosure requirements'.

Consistent with the deliberations at the AASB's December meeting, ED 233 also includes two 'alternative views':

  • Alternative View 1 - effectively arguing against adoption of the investment entities amendments, as the AASB members holding this view consider them "a violation of the basic principle that an entity should account for all of its assets, liabilities, income and expenses".  Other concerns expressed include a lack of a rigorous definition of an 'investment entity' and complication of accounting requirements by adding exceptions
  • Alternative View 2 - immediately issue in Australia the IASB’s investment entity requirements as made by the IASB, without imposing additional disclosure requirements that "imposes significant additional costs on Australian investment entities relative to their international counterparts".  AASB members supporting this view nevertheless would accept the disclosure proposals in the exposure draft in order to retain Australia's compliance with IFRS.

The proposals are open for comment until 29 March 2013.  Click for (links to AASB website):

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