Description of the Applicable Financial Description of the Applicable Financial Reporting Framework (Ref: Para. 15)

Description of the Applicable Financial Reporting Framework (Ref: Para. 15)

1. As explained in ASA 200, the preparation of the financial report by management and, where appropriate, those charged with governance requires the inclusion of an adequate description of the applicable financial reporting framework in the financial report.[13] That description is important because it advises users of the financial report of the framework on which the financial report is based.
2. A description that the financial report is prepared in accordance with a particular applicable financial reporting framework is appropriate only if the financial report complies with all the requirements of that framework that is effective during the period covered by the financial report.
3. A description of the applicable financial reporting framework that contains imprecise, qualifying or limiting language (for example, “the financial report is in substantial compliance with Australian Accounting Standards”) is not an adequate description of that framework as it may mislead users of the financial report.

Reference to More than One Financial Reporting Framework

1. In some cases, the financial report may represent that it is prepared in accordance with two financial reporting frameworks (for example, Australian Accounting Standards and International Financial Reporting Standards). This may be because management is required, or has chosen, to prepare the financial report in accordance with both frameworks, in which case both are applicable financial reporting frameworks. Such description is appropriate only if the financial report complies with each of the frameworks individually. To be regarded as being prepared in accordance with both frameworks, the financial report needs to comply with both frameworks simultaneously and without any need for reconciling statements. In practice, simultaneous compliance is unlikely unless the jurisdiction has adopted the other framework or has eliminated all barriers to compliance with the other framework.
2. A financial report that is prepared in accordance with one financial reporting framework and that contains a note or supplementary statement reconciling the results to those that would be shown under another framework, is not prepared in accordance with that other framework. This is because the financial report does not include all the information in the manner required by that other framework.
3. The financial report may, however, be prepared in accordance with one applicable financial reporting framework and, in addition, describe in the notes to the financial statements the extent to which the financial report complies with another framework (for example, a financial report prepared in accordance with the Australian Accounting Standards that also describes the extent to which it complies with other financial reporting standards). Such description is supplementary financial information and, as discussed in paragraph 47, is considered an integral part of the financial report and, accordingly, is covered by the auditor’s opinion.