The Reporting Entity Concept in Australia: An Exploration of the Impact and Comparison to International Standards

Abstract

This thesis discusses the reporting entity concept as the basis of the differential reporting method in Australia. The aim of this research is to discuss in depth the issues surrounding the reporting entity concept and the impact of these on financial reporting,practitioners and users. To ensure a thorough analysis there are a number of key aspects to this exploration. Firstly, the background of the reporting entity concept and the reasoning behind its initial introduction is introduced. As the basis of differential reporting, entities are required to self-classify as "reporting entities" or "non-reporting entities". Those that classify as "reporting entities" are required to present General Purpose Financial Reports (GPFRs). "Non-reporting entities" are not required to report financial information in this way and may report Special Purpose Financial Reports (SPFRs) which have significantly lower reporting requirements than GPFRs. The debate over the application of the reporting entity concept is introduced, as is the theoretical basis of the concept of the principles based reporting method. Secondly, the evolution of the legislation behind the reporting entity concept was introduced to understand how the legislation has developed. The Australian Accounting Standards Board and the Australian Securities and Investments Commission are the related governing bodies which are discussed. The key legislation of the reporting entity concept the four Statement of Accounting Concepts. These concepts were added to and modified through regulation such as APS 1 Conformity with Statements of Accounting Concepts and Accounting Standards and AASB 1053 Application of Tiers of Australian Accounting Standards. The main issues that have been presented by practitioners and academics are the subjectivity, quality, compliance, and the impact on users. These have been presented as the most significant issues due to the research that states these have the greatest impact on financial reporting and overall usefulness. The objective of financial reporting is to meet users and stakeholder needs to assist their economic decision-making. These issues have been outlined to detrimentally impact upon this ability. The research surrounding these issues will be presented and explored in depth to better understand how the reporting entity is effecting financial reporting The financial reporting in international economies reflects the reporting of the reporting entity to international standards such as the FASB and the IFRS / IASB. This gives insight into how international practitioners and governing bodies react to criticism, concern, and issues within their financial reporting methods. It also sheds light on the use of the rules based approach to differential reporting such as the US with the FASB. Finally, the implication of this research and comparison is therefore considered and recommendations for future regulation and policy are presented. Furthermore, the necessary future research to provide a basis for the update in policy is outlined.