Accounting Reporting Entity and Society Word limit: 2,000 words maximum (excluding references and the executive summary). In-text
citations, the introduction, body and conclusion of the report are included in the
word count.
Accounting Reporting Entity and Society Description/Requirements
Background:
The IASB issued a revised Conceptual Framework for Financial Reporting (RCF) in March 2018. There is an inconsistency between the definition of ‘reporting entity’ in the RCF and the Australian ‘reporting entity concept’ in SAC1 Definition of a Reporting Entity.
To maintain IFRS adoption in Australia, the AASB must adopt the RCF and withdraw SAC1. As the reporting entity decision affects the choice of financial statements a company can prepare and lodge with ASIC, the new RCF could specifically impact public companies that are not listed on the Australian Securities Exchange and large proprietary companies.
Accounting Reporting Entity and Society Required
Assume you are a business consultant, reporting to the board of directors of KiMy Ltd, a large
Australian public company which is not listed on the Australian Securities Exchange. KiMY is a family owned company with ten major shareholders, five of which are board member. KiMy provides software services to the Victorian government. Over a number of years, it received over $10,000,000
to develop and operate the Victorian public transport ticketing system. On a continuing basis, KiMy receives significant business from the Victorian Government to maintain and update the ticketing system. KiMy also has a number of other large customers. There were problems and delays with the development and implementation of the ticketing system which attracted much media attention.
Most Victorians have an opinion and interest in the ticketing system. KiMy is required to lodge annual reports with ASIC and currently prepares Special Purpose Financial Statements (SPFS), having decided it is not a reporting entity which is required to lodge General Purpose Financial Statements (GPFS).
You have been contracted to provide a report to KiMy’s Board of Directors which:
- Explains the difference between the SAC1 reporting entity definition and the RCF definition. (suggested 150 words)
- Explains the distinction in the current requirements for GPFS Tier 1 and GPFS Tier 2 under the current reporting framework. (Suggested 100 words)
- Explains the differences between the GPFS Reduced Disclosure Regime (RDR) and the proposed GPFS – Specified Disclosure Requirements (SDR) and the potential impact of each of these differences on shareholders’ ability to make investment decisions about the company.(suggested 150 words)
- Explains whether KiMy will be required to prepare GPFS Tier 1 under RCF. (suggested 150 words)\
- Evaluates, taking an agency theory lens, whether GPFS Tier 1 would provide better quality information for decision making for KiMy’s shareholders than GPFS Tier 2 (SDR). (suggested 500 words) continued over the page
- Evaluates, taking a stakeholder theory lens, whether GPFS Tier 1 would provide better quality information for decision making for the Victorian Government than the current SPFS that is issues. (suggested 400 words)
- Identifies the challenges that KiMy will face when it is required to prepare GFRS Tier 1 following the AASB’s adoption of the RCF, and provides suggestions on how the company could meet the challenges. (suggested 350 words)
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