New Conceptual Framework - assets.kpmg.com · New Conceptual Framework End of special purpose financial statements for corporates? 29 May 2018

New Conceptual Framework

End of special purpose financial statements for corporates?29 May 2018

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Conceptual Framework for Financial Reporting

?

IASB Conceptual Framework

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What is the Conceptual Framework?

Addresses fundamental issues

What is the objective of financial reporting?

What makes financial information useful?

What are assets, liabilities, equity, income and expenses, when should they be recognised and how should they be measured, presented and

disclosed?

A practical tool that assists

Board

to develop Standards

Preparers

to develop consistent accounting policies

All

to understand and interpret Standards

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Conceptual Framework at a glance

Object of financial reporting

Qualitative characteristics of useful financial information

Description of the reporting entity and its boundary

Definitions of an asset, a liability, equity, income and expenses

Criteria for including assets and liabilities in the financial statements (recognition)

Guidance on when to remove assets and liabilities (derecognition)

Measurement bases and guidance on when to use them

Concepts and guidance on presentation and disclosure

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Why was the Conceptual Framework revised?

Main improvements

Filled in the gaps, for example, concepts on measurement and

presentation and disclosure, including guidance on the use of profit or loss

and OCI

Updated, for example, the definitions of an asset and a liability and

recognition criteria

Clarified, for example, the roles of stewardship and prudence in financial

reporting

Previous version of Conceptual Framework useful but some improvements needed

incomplete out of date unclear

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Conceptual Framework at a glanceNew

Measurement Concepts on measurement, including factors to be considered when selecting a measurement basis

Presentation and disclosure Concepts on presentation and disclosure, including when to classify income and expenses in other comprehensive income

Derecognition Guidance on when assets and liabilities are removed from financial statements

Updated

Definitions Definitions of an asset and a liability

Recognition Criteria for including assets and liabilities in financial statements

Clarified

Prudence Stewardship Measurement uncertainty Substance over form

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Impacts and challenges

Control-based

approach -derecognition

Bundles of

assets

Practical ability -

liabilities

Applying IASB Conceptual Framework in Australia

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New reporting entity definition

IASB – RCF• an entity required, or chooses, to

prepare financial statements• can be a single entity/ portion of an

entity/ comprise > 1 entity• not necessarily a legal entity

AASB – SAC 1• an entity that is required to prepare

general purpose financial statements

Inconsistency between the two definitions could result in misinterpretation, the wrong application of AABSs or non-compliance with IFRS

Users

Boundary

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Special purpose financial statements

55%-60% of accounts lodged with ASIC are Special purpose!

Extract from AASB Research Report No. 1 (2014)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Large companies

Foreign companies

Small companies

Unlisted public companies

Public company - limited by guarantee

Total

GPFS SPFS

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Special purpose to general purpose – why bother?

Benefits of transition Costs of transition

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Other entities

Private grand

fathered companies

Private trusts

Small vs Large test

So what is off the table?

Two-phased approach

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Two-phased approachIdeally not more

than 2 years between the two

Publicly accountable – GPFS Tier 1 Not publicly accountable – GPFS Reduced Disclosure Requirements

(RDR): existing Tier 2OR

GPFS – Specified Disclosure Requirements (SDR): new Tier 2

1 Framework for the Preparation and Presentation of Financial Statements (June 2014)

Publicly accountable for-profit entities+ entities voluntarily reporting compliance with IFRS – i.e. GPFS Tier 1 Apply RCF* (that includes new definition of “reporting entity”)

All other entities – i.e. GPFS Tier 2 and SPFS Continue to apply existing Framework1 (that includes the Australian

“reporting entity” concept)

Phase 2:One

Conceptual framework –

RCF*

Phase 1: Two

Conceptual frameworks

* RCF = IASB Revised Conceptual Framework

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Phase 2: RDR versus SDR

AASB 101 Presentation of Financial Statements

AASB 107 Statement of Cash Flows

AASB 108 Accounting

policies, changes in Accounting

Estimates and Errors

AASB 1054

Australian Additional

Disclosures

AASB 1048

Interpretation of Standards

Related party transactionsRevenue

Impairment of assets

Income taxes

All disclosures for specified standards

Recognition and measurement of all standards

Reduced disclosures for allstandardsExisting Tier 2

Reduced disclosures – RDR Specified disclosures – SDR

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Phase 2: What else?

Exposure Draft

Four other options + IFRS for SMEs

Transitional relief

Additional tier(s)

Earliest finalisation and application in 2020-2021

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AASB proposal – revised reporting framework

Tier 1 GPFS

Tier 2 GPFSOption 1 – Existing RDR

orOption 2 – New SDR

Publicly accountable?(or Federal, State, Territory or Local

Government)

No general purpose financial reporting

required

Legislation or ‘other requirement’ requires

financial report complying with Australian Accounting

Standards

Yes

Yes

No

NoSubmission due

Phase 1 –9 August 2018

Phase 2 –9 November 2018

Thank you


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Liability limited by a scheme approved under Professional Standards Legislation.

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Documents

New Conceptual Framework - assets.kpmg.com · New Conceptual Framework End of special purpose financial statements for corporates? 29 May 2018