The AASB's controversial ED Australian Additional Disclosures - Investment Entities
is worth a read. Not many exposure drafts are issued including two Alternative Views. Because it imposes on Australian investment entities significant disclosure requirements over and above what is required by the IASB, it is worthy of attention.
Westworth Kemp have lodged a submission that is highly critical of the AASB's proposals.
Our submission together with detailed answers to the AASB's questions expresses our grave concern with the tenor of the exposure draft. In 2002, the FRC decided that Australia should adopt IFRS, a decision that was implemented by the AASB issuing a “stable platform” of converged Australian standards in 2004, the application of which resulted in compliance with IFRS. At that point, Australia ceded its sovereignty in terms of standard-setting for publicly accountable private sector entities and the role of the AASB became the role of a commentator and lobbyist in an international forum. Shortly after the changeover to AIFRS took place, the few optional treatments permitted under IFRS were reinserted into the standards and many of the remaining Aus paragraphs were removed to ensure, as far as possible, complete convergence. Australian entities then had access to all the accounting treatments permitted under IFRS overseas. To insert significant new Australian disclosure requirements now and to delay the adoption of a standard that was passed by the IASB in October 2012 is in our view a retrograde step. Furthermore Australian investment entities are being prejudiced in an international context by being prevented from early-adopting the October 2012 amendments.
Because the proposals are so at odds with IFRS, they do not fall within the provisions of IAS 1 (AASB 101) paragraph 15 which allows the inclusion of additional information to allow fair presentation. To run that argument would be to argue that the standards set by the IASB, which specifically exempt investment entities from consolidating, do not give a fair presentation. Such a view undermines the whole principle of international harmonization, achieved by using IFRS as the basis for Australian financial reporting and is at odds with the powers of AASB set out in s227 of the ASIC Act. Consequently, if ED 233 is issued as a standard, Australian companies complying with the standard would therefore not be able to make the unequivocal statement of compliance with IFRS required by AASB 101 (IAS 1) paragraph 16.
We understand that control based consolidation has been a key feature of Australian financial reporting for a long time and has stood Australia in good stead, but in our view there are circumstances where the nature of the investor relationship is better portrayed by accounting for the investment at fair value.
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