A stapled entity is an arrangement whereby a legal entity (typically a company) has issued equity instruments that are ‘stapled’ to the equity instruments of another legal entity or entities (typically a trust). The 'stapled securities' cannot be traded independently and are quoted at a single price where listed. The stapling results in the two (or more) legal entities having equity holders in common. Generally, the stapling arrangement can only be terminated if it becomes unlawful or by a super majority vote of the stapled security holders.

Under Australia's Corporations Act 2001, ASIC has the power to issue a 'class order' that effectively changes the operation of the law for a particular class of entity. Australian equivalents to International Financial Reporting Standards (IFRS), as made by the Australian Accounting Standards Board (AASB), are legal instruments under Australian law, and accordingly ASIC is able to provide relief and modifications of reporting requirements using a class order.

ASIC had previously issued a Consultation Paper on stapled arrangements and included proposals for a class order would have the effect of removing any legal impediment under the Act from an entity presenting combined financial statements in the financial report of a stapled entity. However, these class order amendments do not implement these proposals, but instead extend earlier interim relief given to stapled entities, pending further consideration of reporting requirements by the IFRS Interpretations Committee.

The ASIC press release (link to ASIC website) notifying the amended Class Orders notes the following issues in relation to the treatment of stapling arrangements under the Australian equivalents to IFRS 3 and IFRS 10:

Consolidated or combined financial statements provide useful and meaning information on investors’ interest in the overall stapled arrangement, and may be necessary to give a true and fair view of the individual entity financial reports. Transactions between the entities are eliminated in preparing consolidated or combined financial statements... Under a new accounting standard on consolidation accounting, it is not clear that stapled entities would be permitted to prepare consolidated financial statements in the absence of the class order.

The IFRS Interpretations Committee is meeting on 29–30 January 2014, and this matter is currently included on the agenda for the meeting. The agenda paper on the issue (link to the IASB website) contains a staff recommendation that the issue not be added to the Committee's agenda as "significant diversity in practice does not exist and is not expected to emerge in the future". The ASIC press release indicates that ASIC may review its position "if the IFRS Interpretations Committee decides not to address the matter".

Further information, including access to the class orders, is available on the ASIC website.