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AASB essay on the Australian 'reporting entity concept'

  • AASB (Australian Accounting Standards Board) (lt blue) Image

04 Apr 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.

The essay, AASB Essay 2014-1 The Critical Role of the Reporting Entity Concept in Australian Financial Reporting, provides a history and summary of the use of the 'reporting entity' concept for differential reporting purposes. Under Australia's existing differential reporting regime, entities that are not 'reporting entities' are permitted to prepare 'special purpose financial statements', which do not require compliance with all, or in some cases any, Australian Accounting Standards.

The essay discusses a number of topics, including;

  • An overview of the history of the 'reporting entity concept' and its use prior to and since Australia's transition to Australian equivalents to International Financial Reporting Standards (IFRSs)
  • Concerns raised about how the reporting entity concept has been applied in Australia, given determining whether an entity is a 'reporting entity' requires the exercise of professional judgement
  • A summary of proposals and consultations undertaken by the AASB in developing a possible replacement for the reporting entity concept, and whether it should be withdrawn completely
  • Brief discussion of research commissioned by the AASB to determine whether there is consistency in the current treatment of entities as either reporting entities or non-reporting entities, and the nature of the accounting policy choices being made by non-reporting entities
  • Policy implications of the potential removal of the reporting entity concept and focusing Australian Accounting Standards on general purpose financial statements only, including for Australian federal, state and other regulators.

The essay is available on the AASB website.

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