The property industry is the most prominent user of the stapled entity structures affected by ASIC’s CP 217.
All of the largest listed property companies are stapled groups and industry is keen to ensure the reporting framework is simple, effective and efficient.
Unfortunately, CP 217 unnecessarily forces staples to switch from reporting consolidated financial statements to combined financial statements.
Consolidated financial statements already present a true and fair view of accounts and staples are legally obligated to use consolidated statements under AASB 10 Consolidated Financial Statements and the Corporations Act.
Staples also need to report consolidated accounts to comply with bank covenants.
Although ASIC relief will allow staples to prepare consolidated statements (if combined statements are also prepared), this duplication is complex and costly.
Critically, any proposal to report combined accounts creates a series of problems for industry because it:
1) duplicates financial information already prepared by stapled groups which will confuse investors; and
2) increases compliance costs by forcing many staples to change the way they prepare financial accounts.
Importantly, industry is unsure why there needs to be a change to combined accounts.
Consolidated financial statements have been the accepted reporting format for stapled groups since:
1) the introduction of International Financial Reporting Standards; and
2) ASIC’s Class Order 13/1050 Financial Reporting for Stapled Entities (which applied at 30 June 2013) permitted consolidated accounts;