The document discusses the simplification of Australian government financial statements, outlining the motivations such as limited readership and the excessive complexity in disclosures. It details the approach taken to produce shorter, clearer statements that meet standards without unnecessary elaboration, alongside a simplification program intended to reduce preparation and audit costs. Benefits from this initiative include a 30% reduction in document volume and improved efficiency for auditors and agencies.

1. 1
Simplification of Government
Financial Statements – the Australian
Experience
Alan Greenslade
First Assistant Secretary, Financial Analysis Reporting and
Management
Department of Finance

2. 2
Background
 Uses of independently set IFRS based standards
o similar to IPSAS standards
 GFS overlay at Consolidated level
 Standards are designed for full requirements of GPFR
 Disclosure requirements are set by the accounting standards
 Around 200 reporting entities
March 2017

3. 3
Drivers for simplification
 Financial statements have a limited readership
o Users interested in more timely and accessible information
o Budget papers are simpler and more widely read
o Final Budget Outcome is more accessible and timely
 Accretion of “clutter” over time
o over-explanation of detailed matters
o technical worthiness tending to override readers’ needs
o use of statements for “other” accountability purposes
 Cost of preparation and audit
 “Red Tape” initiatives
March 2017

4. 4
Simplification approach
 Shorter statements (remove information overload)
 Better presentation of the same information (improve clarity)
 Meet the standards – don’t unneceserally exceed
 Considering trade-off between reducing preparation and audit
costs vs user information needs
March 2017

5. 5
Simplification program
 Rigorous review of disclosures not required by standards
 Consider the materiality of some disclosures
 Write technical matters for brevity and clarity
 Restructuring the order of disclosure notes
 RDR for most entities (that do not have complex financial risk)
March 2017

6. 6
Implementation considerations
 Important to have the auditors “on side”
 Costs are mostly up front and can be seen as an investment
 Reducing and simplifying entity financial statements adds to
the processes, costs and risks of W-o-G consolidation
March 2017

7. 7
Process steps
 New Financial Reporting Rules for entities
o simpler, shorter and clearer
 Entities were enabled and encouraged to have “fit for purpose”
disclosures
 Model financial statements showing how the most common
disclosures could be better presented
 Guide provided to entities to support simplification
o including a checklist for better presentation
March 2017

8. 8
Benefits realised
 Less volume – 30% reduction in pages, leading to:
o Better understanding
o Less technical information eg accounting policies
o Less information overload
 Streamlined preparation process
 Auditors and audit committees have less to review
March 2017

9. 9
Matters to be resolved
 Limitations on simplification imposed by accounting standards
 Implementing RDR
 Tension between readability expectations and accountability
expectations
 A high proportion of disclosure notes are still highly technical
 Look again at the requirements of the standards
o supported by the standard setter
March 2017

10. 10
March 2017
Questions?