Issue of Exposure Draft ED 328Issue of Exposure Draft ED 328

Issue of Exposure Draft ED 328

1. The Board’s proposals with respect to the amendments finalised in this Standard were exposed for public comment in December 2023 through Exposure Draft ED 328 Supplier Finance Arrangements: Tier 2 Disclosures.
2. The significant issues considered by the Board in developing ED 328 are addressed in the following section.

Relevance of the amendments to AASB 1060

1. The AASB For-Profit Entity Standard-Setting Framework and the AASB Not-For-Profit Entity Standard-Setting Framework outline the approach adopted by the Board for considering whether to add to or amend disclosure requirements in AASB 1060 when the IASB makes amendments to full IFRS Standards.
2. The standard-setting frameworks first consider whether the amendments introduce a significant recognition and measurement difference between full IFRS Standards and the IFRS for SMEs Accounting Standard. If they do not, the standard-setting frameworks state that no further action is required unless:
   1. the disclosures address a matter of public policy;
   2. the disclosures are of particular relevance in the Australian environment; or
   3. the amendments clarify or reduce existing disclosure requirements in full IFRS Standards.
3. The Board noted that the disclosure requirements were added to IFRS Standards to address users’ need for information relating to an entity’s liquidity position and cash flow. The feedback from Australian users reinforced the need for these disclosures.
4. Although the Board had not received any feedback on whether these disclosures were of similar importance to users of Tier 2 financial statements, in deciding whether to propose adding disclosures about supplier finance arrangements to AASB 1060 the Board considered the principles it used when developing AASB 1060 and subsequently when considering whether to add to or amend the disclosure requirements.
5. When developing and considering amendments to AASB 1060, the Board considers that information about short-term cash flows and obligations, commitments or contingencies, liquidity and solvency, measurement uncertainties, accounting policy choices and disaggregation of amounts presented in the financial statements would be particularly important to the users of Tier 2 financial statements.
6. Therefore, the Board proposed amendments to AASB 1060 to require Tier 2 entities to disclose information relating to their supplier finance arrangements. The amendments would require a Tier 2 entity to include in its financial statements the same specific disclosures that AASB 2023-1 requires in the financial statements of entities applying Tier 1 reporting requirements. The Board considered the proposed disclosures would provide additional information about the cash flows, liquidity and solvency of Tier 2 entities.