The IPA has welcomed the government’s introduction of legislation to extend unfair contract terms (UCT) protections for small business. Under the new protections, a court will be able to strike out a term of a small business contract that it considers unfair.
Under these protections, a contract will be a small business contract if at least one party has fewer than 20 employees and the contract value is below the prescribed threshold of $100,000 (or $250,000 for a multi-year contract).
However, the IPA believes the $100,000 threshold is insufficient, as it significantly restricts the availability of the UCT provisions to small business and may lead to unjustifiable distinctions being drawn between consumer and business contracts. The ‘take it or leave it’ rationale for reform can apply just as much to contracts over $100,000 as to those for less than this amount.
The monetary limit is of particular concern to small businesses that make only a few large contracts each year, rather than numerous smaller ones. The existence of the monetary limit will also make it possible for a dominant firm to avoid the UCT provisions by aggregating the contracts it makes with a particular small business, so they exceed that limit.
Overall, however, the IPA considers the legislation to be a positive step in support of small businesses across Australia and looks forward to its implementation. We will work with our members and small business to raise awareness of the benefits of this important legislation.
Proposed amendment to the effective date of IFRS 15 ‘Revenue from Customer Contracts’
In a submission to the Australian Accounting Standards Board (AASB) and International Accounting Standards Board (IASB), the IPA has stated it does not support a proposed amendment to defer the effective date of IFRS 15 and its Australian equivalent AASB 15.
The IPA believes the deferral of the effective date not only creates uncertainty but taints the standard-setting process and undermines the credibility of the IASB and its ability to publish quality standards in a timely manner.
We reject that the circumstances surrounding IFRS 15/AASB 15 are exceptional, as set out in the exposure draft.
In particular:
1. Other standards have had amendments of a more substantial nature issued without resulting in the deferral of the standard.
2. The IPA does not believe an implementation date of two years is insufficient to make the necessary changes to systems and processes for preparers. The Australian conversion to the full suite of IFRS standards was undertaken in a similar timeframe.
3. We totally reject a linkage of the implementation date to Topic 606 as being relevant for IASB. The implementation issues arising from the changes in US GAAP are not relevant for the users of IFRS.
An improved standard that is in the interests of users should not be delayed just to have the same applicable date for one jurisdiction, particularly when that jurisdiction is not in the IFRS-compliant family.
ED 262 ‘Fair Value Disclosure of Not-for-Profit Public Sector Entities’
The IPA also has submitted to the AASB that it does not support the exemption of not-for-profit public sector entities from the disclosure requirements of the AASB 13 ‘Fair Value Measurement’ standard.
The IPA believes that after only one year of operation of AASB 13, it is premature to make amendments to the disclosure requirement without allowing practice to stabilise. We would prefer the AASB to monitor practice in relation to the AASB 13 disclosure requirements and, if deemed necessary, provide guidance on their application, including the exercise of professional judgement and the application of materiality to the disclosure requirements.
The IPA sees no reason for a substantive difference in the reporting obligations of public sector not-for-profit entities and those private sector not-for-profit entities. Public sector entities should be held accountable to the same standard as their private sector counterparts.
Furthermore, the IPA believes that in an environment where public sector assets may be sold, leased or otherwise ‘structured’ to fund public sector spending, users (including taxpayers, ratepayers and parliaments) should be provided with information to enable them to understand the sensitivities of fair values to underlying assumptions. This will enable them to be appropriately informed in relation to the sale or redeployment of such assets.
