As noted in our analysis of the AASB's February 2013 meeting, the AASB has had a long running project on differential reporting in the Australian context.

When Australia moved to implement Australian Accounting Standards that are equivalent to International Financial Reporting Standards (IFRS), the existing differential reporting regime based on the 'reporting entity concept' was carried over and implemented such that certain standards do not apply to 'non-reporting entities'.

However, in practice, many entities, particularly those required to prepare financial reports under the Australian Corporations Act 2001, applied the recognition and measurement, but not presentation and disclosure, requirements of standards in their 'special purpose financial reports'(SPFRs), consistent with views of the Australian regulator, the Australian Securities and Investments Commission (ASIC).

In response to unfavourable feedback to later AASB proposals to consider a move away from the reporting entity concept, the AASB commissioned research into whether the reporting entity concept was being appropriately applied.

At this meeting, the AASB noted that "there is doubt as to whether the reporting entity concept is being applied as intended" and "a proportion of SPFSs lodged with the ASIC appear not to have applied the recognition and measurement requirements of all applicable Australian Accounting Standards".

The AASB went on to conclude "the reporting entity concept should continue to be used as the basis for identifying entities that, in concept, should be subject to general purpose financial reporting requirements". Based on the research report and further discussion, the AASB decided that its mandate should be to set accounting standards for preparing general purpose financial statements.  Accordingly, an exposure draft is to be developed to propose:

• a change of the application focus of Australian Accounting Standards from ‘reporting entity’ to ‘general purpose financial statements’
• the clarification of general purpose financial statements in the Australian context.

As under these proposals the AASB would effectively no longer set accounting standards for use in preparing special purpose financial statements, a number of regulatory and reporting issues are likely to arise. Additionally, AASB staff are to liaise with regulators, including the Australian Treasury, the Australian Securities and Investments Commission (ASIC) , the Australian Charities and Not- for-profits Commission (ACNC) and relevant State government bodies, "with a view to coordinating the Board’s and those regulators’ efforts in dealing with the issues emerging from the research".

The AASB's meeting also saw discussion on a number of other topics, including sweep issues arising in relation to the forthcoming standard on financial reporting by superannuation entities, and discussion of various IASB, IFRS Interpretations Committee and International Public Sector Accounting Standards Board projects.

The next AASB meeting is scheduled to be held on 29-30 May 2013.

Click for the AASB Action Alert (link to AASB website).