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The introduction of Australian Equivalents to International
Financial Reporting Standards (AIFRS) in January 2005 has made
the past two years a challenging period for financial
reporters.
When AIFRS was adopted by Australia, it was decided that all
companies preparing general-purpose financial reports would be
required to adopt AIFRS in its entirety. This included a number
of highly complex accounting standards that are intended
primarily for a capital market structure and are less relevant
in the private sector. Furthermore, private companies preparing
general purpose financial reports often lack the skills and
resources to apply the requirements of AIFRS.
This anomaly has been recognised and it has been submitted
that the International Accounting Standards Board (IASB) should
develop specific standards for non-listed entities. The aim of
this project is to design one accounting standard that small
and medium enterprises (SMEs) can apply, that will be
consistent with IFRS and will reduce reporting
requirements.
The IASB has released an accounting standard, currently
referred to as the 'SME' Standard, which is still in
draft format. The scope of the current draft states that it
will apply to entities that 'do not have public
accountability' (non-disclosing entities, as defined in the
Corporations Act) and do 'publish general purpose financial
statements'.
At present, the draft therefore excludes non-reporting
entities from its requirements, however should this proposed
standard be adopted, it is likely that the definition of a
'reporting entity' (as included in Exposure Draft 148)
will be amended to include all entities that lodge their
accounts with a regulatory body such as ASIC.
Aspects of the SME draft that differ to AIFRS include:
Goodwill treatment – Proponents argue that goodwill
should be able to be amortised as opposed to tested for
impairment;
Recognition of intangible assets – It is suggested
that upon acquisition most intangible assets should be
included within goodwill rather than requiring separate
identification;
Income tax – Many of the exceptions and special
rules included in AASB 112 would be omitted from the
standard.
It is likely that the introduction of the SME Standard will
both increase and decrease reporting requirements. For
instance, for:
current non-disclosing companies that prepare general
purpose financial reports, the adoption of the Standard will
reduce reporting requirements;
large non-reporting entities that may be captured by the
new Standard, will find themselves reporting under a
significantly more rigorous reporting framework.
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general guide to the subject matter. Specialist advice should
be sought about your specific circumstances.
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