Costs vs benefitsCosts vs benefits

Costs vs benefits

1. The Board identified the following benefits arising from the adoption of the new Tier 2 Standard over the other options considered:
   1. The IASB has developed the disclosures in the IFRS for SMEs Standard with for-profit private sector entities that are not publicly accountable entities in mind and considers that they are adequate to meet the needs of the relevant users[50].
   2. A comparison of the new disclosures to the disclosures that would be required under the SDR and RDR has confirmed that adoption of the new Tier 2 Standard addresses stakeholders concerns by resulting in a level of disclosures that lies in between the current RDR and the proposed SDR requirements.
   3. This option is based on a bottom-up approach in developing disclosures and avoids needing to identify specific full IFRS disclosures that need to be retained and those that can be excluded. It is a more rigorous and targeted way of reducing disclosures to an appropriate level (based on previous experiences with the RDR approach, as it involves needing to justify additional disclosures rather than the removal of disclosures from full IFRS).
   4. This option introduces more flexibility as it allows drafting disclosures to suit the circumstances and not be restricted by existing full IFRS disclosures.
   5. Setting out the disclosures in a separate Standard will make it easier for stakeholders, as it avoids having to identify applicable disclosures via shading in between the full disclosures. The Board noted that this will also improve readability where parts of sentences were shaded in the RDR (ie excluded).
2. However, the Board noted that adopting this Standard will result in a divergence from the New Zealand RDR Framework. The AASB’s For-Profit Entity Standard-Setting Framework sets out that differences between accounting Standards issued in Australia and New Zealand for for-profit entities should be minimised wherever possible to reduce the costs for entities operating trans-Tasman. This divergence could cause inconvenience for entities operating trans-Tasman. Notwithstanding this, the Board noted that the R&M requirements for entities applying the Tier 2 reporting frameworks in Australia and New Zealand would remain consistent and given the current situation of many Australian entities not complying with full R&M requirements, the overall outcome is likely to be more consistency with NZ requirements than currently. The Board further noted that the NZ XRB has asked its stakeholders about the importance of harmonisation with Australia in their Targeted Review of the Accounting Standards Framework in July 2019 and that the NZASB will consider the feedback in future discussions on whether and how to respond to the developments in Australia and internationally.