Of course, the public sector has not been the only one to raise concerns. The not-for-profit sector and those charged with reporting for small and medium enterprises (SMEs) have also considered the ongoing utility and cost-benefit associated with their continued compliance with A-IFRS.
Response to concerns
These concerns have not gone unnoticed by the Australian Accounting Standards Board (AASB) or the International Accounting Standards Board (IASB) although each of these standard-setters has responded in a different way. The IASB has promulgated their IRFS for SMEs response while the AASB considered this solution to be less suitable than that which they ultimately promulgated – the Reduced Disclosure Regime (RDR). This regime was implemented with a commencement date of 1 July 2013, although suitable organisations can adopt early. Among other things, the AASB was keen to implement the RDR as they wished to ensure a seamless transition between Tier One and Tier Two organisations by ensuring uniform measurement and recognition criteria between the tiers. Tier One contains those organisations that are required to, or choose to, adhere to the full requirements of A-IFRS while Tier Two organisations are those that have the capacity to choose to apply the RDR.
Reporting requirements
In terms of the application of Tier One and Tier Two arrangements, AASB 1053 and AASB 1010-2 (the promulgations) provide the machinery and set out the principles. Essentially, transaction neutrality is retained and the effect of the regime is simply to allow certain entities to avoid reporting certain elements.
Only Tier Two organisations can apply the RDR regime reporting requirements provided they meet certain criteria discussed below. All other reporting entities are required to report as Tier One organisations and, as such, to apply the full A-IFRS requirements.
Importantly, if an organisation is able to and chooses to apply Tier Two disclosures only, it does not have the right to claim compliance with the accounting standards.
