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Milestone reporting reform finally a reality

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  arrow Key points
arrow The Institute has welcomed the recent legislation designed to reduce red-tape and improve Australia’s reporting framework
arrow The Institute has been engaged with the government over a number of years on red-tape reduction measures, particularly for not-for-profit entities
arrow Unfortunately the legislation has resulted in side-effects for smaller entities regarding dividend tests. 		 

Long-awaited financial reporting reform, making significant changes to the reporting requirements imposed on companies limited by guarantee, parent entities and to the payments of dividends, is now a reality.  
 
The federal government recently passed legislation - the Corporations Amendment (Corporate Reporting Reform) Bill 2010. The legislation is effective from the day of Royal Assent, 28 June 2010. 
 
Kerry Hicks, the Institute’s Head of Reporting, said that the Institute has been engaged with the government over a number of years on red-tape reduction measures, particularly for not-for-profit entities.  
 
The Institute specifically supports the following areas of red-tape relief:  

  • Financial reporting relief to limited by guarantee not-for-profit entities, relieving up to 47 per cent of entities from preparation, lodgement and audit of financial reports, allowing them to focus on service delivery rather than compliance work  
  • Relief from the preparation of parent entity financial statements for corporates, including listed entities, replaced instead with minimal note disclosure  
  • Improved flexibility in changing year ends  
  • Changing the dividends test from a ‘profits test’ to a ‘solvency test’, similar to that existing in New Zealand.
While the Institute believes the proposals will reduce the burden for many corporates, there will also be adverse side-effects for smaller entities.  
 
’For some corporates, the change to the dividends test will impose additional compliance costs – particularly for those entities that do not currently adopt all accounting standards,’ said Ms Hicks.  
 
The Institute understands from comments raised in parliament recently that the government may be prepared to further discuss the issues relating to the dividends test. As such, the Institute will continue to work with its members, government and other professional bodies on the issue.  
 
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Information current as at Thursday, 8 July 2010