This phase of the AASB’s work affects the financial statements of reporting entities or those financial statements otherwise held out as general purpose financial statements. As such, entities that continue to prepare special purpose financial statements are unaffected.

AASB 1053 Application of Tiers of Australian Accounting Standards

AASB 1053 establishes a revised differential financial reporting framework consisting of two tiers of financial reporting requirements for those entities preparing general purpose financial statements:

  • Tier 1: Australian Accounting Standards; and
  • Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.

Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but contains significantly fewer disclosure requirements through the  implementation of AASB 2010-2 which amends the disclosure requirements of other applicable standards.

The following entities are required to apply Tier 1 reporting requirements (i.e. full IFRS):

  • for-profit private sector entities that have public accountability; and
  • the Australian Government and State, Territory and Local Governments.
Subject to AASB 1049, General Government Sectors of the Australian Government and State and Territory Governments would also apply Tier 1 reporting requirements.

The following entities can elect to apply Tier 2 of the framework when preparing general purpose financial statements:

  • for-profit private sector entities that do not have public accountability;
  • not-for-profit private sector entities; and
  • public sector entities, whether for-profit or not-for-profit, other than the Australian Government and State, Territory and Local Governments.
Applicable not-for-profit or public sector regulators may also have the power to deem certain entities as Tier 1 reporters.
Entities that would otherwise be Tier 2 entities may elect to apply Tier 1 and adopt full disclosure requirements of AASB standards.
Entities complying with Tier 2 would not be able to state compliance with IFRSs.

What is public accountability?

A for-profit private sector entity has public accountability if:

  • its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
  • it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.  This is typically the case for banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.
AASB 1053 is mandatorily applicable for financial reporting periods beginning on or after 1 July 2013, however early adoption is permitted for annual reporting periods beginning on or after 1 July 2009.  Given the reduced disclosures available for Tier 2 entities, early adoption may be an attractive proposition.
For readers looking for model financial statements for Tier 2 entities, refer to the publication ‘XYZ Model Financial Accounts (Reduced Disclosure Requirements) - Incorporating the Corporations Amendment (Corporate Reporting Reform) Act 2010’ which is due out soon.

Transition requirements – application of AASB 1

The application (or in some situations, re-application) of AASB 1 will need to be considered by entities upon adoption of AASB 1053. 
We consider this in more detail in our upcoming publication XYZ Model Financial Accounts (Reduced Disclosure Requirements) - Incorporating the Corporations Amendment (Corporate Reporting Reform) Act 2010).

AASB 2010-2 Amendment to Australian Accounting Standards arising from Reduced Disclosure Requirements

AASB 2010-2 makes amendments to  Australian Accounting Standards and Interpretations to give effect to the reduced disclosure requirements for Tier 2 entities.  It achieves this by specifying the disclosure paragraphs that a Tier 2 entity need not comply with as well as adding specific ‘RDR’ disclosures. 
This standard is also mandatorily applicable for financial reporting periods beginning on or after 1 July 2013, however early adoption is permitted for annual reporting periods beginning on or after 1 July 2009.  As mentioned, early adoption should be considered by all Tier 2 entities.


Contact

Rob Mackay
T +61 3 8635 1800
rmackay@moorestephens.com.au

www.moorestephens.com.au