The AASB Research Centre has published Research Report No. 1 Application of the Reporting Entity Concept and Lodgement of Special Purpose Financial Statements, to inform public debate about requirements to lodge financial statements and their quality. The principal authors are Professor Peter Carey (Deakin University), Associate Professor Brad Potter (Melbourne University) and Professor George Tanewski (Deakin University).
The Report analyses financial statements lodged by unlisted companies (including large proprietary companies and public companies limited by guarantee) with the Australian Securities and Investments Commission (ASIC); and financial statements lodged by a range of state-based entities (including incorporated associations) with regulators in Victoria, NSW and Queensland.
The Report raises some fundamental questions about the adequacy of Australian financial reporting by these entities. In particular, the Report reveals widespread lodgement of special purpose financial statements (SPFSs), which do not apply all accounting standards. SPFSs are not general purpose financial statements (GPFSs), which are those prepared in accordance with all applicable accounting standards, designed for users who are unable to demand the information they need to inform their economic decision-making.
Mr Stevenson expressed strong concern about the questionable quality of the many and varied forms of lodged SPFSs: “I see no consistent financial reporting purpose being served in such reporting and worry that lodgement of financial statements has become only a matter of (costly) compliance.” He went on to say: “The AASB would like to see a general consensus about the need for lodged financial statements to serve the needs of users (actual and potential), prepared in accordance with accounting standards and subject to meaningful audit reports. Without clarity around the basis of accounting adopted, users are left with uncertainty and regulators face unmanageable enforcement tasks.”
The report is available here.
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