Issue

AusCF1

AusCF entities are:

(a)            not-for-profit entities; and

(b)            for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).

For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies.  For-profit entities applying the Conceptual Framework for Financial Reporting are set out in paragraph Aus1.1 of the Conceptual Framework.

1

Legislation to introduce the goods and services tax (GST) on 1 July 2000, titled A New Tax System (Goods and Services Tax) Act 1999, was assented to on 8 July 1999.  The GST replaced the wholesale sales tax regime and a number of other taxes.

2

The GST legislation provides that the price quoted for the supply of goods and services and the price paid by the purchaser must include the amount of the GST where applicable.  As such, the gross proceeds collected by the supplier includes the amount of GST.  The GST is collected on behalf of the taxation authority.  The purchaser of goods and services subject to the GST is, in many circumstances, able to obtain input tax credits for the GST included in the price of the goods and services acquired.  Therefore, the price paid by the purchaser includes the GST that will be recovered from the taxation authority where an input tax credit can be claimed.

3

While authoritative requirements in Australia do not deal specifically with accounting for the GST, Accounting Standard AASB 15 Revenue from Contracts with Customers specifies requirements for recognising revenue from contracts with customers and states that amounts collected on behalf of third parties such as some sales taxes are excluded from the transaction price and, therefore, revenue.  Furthermore, AASB 102 Inventories provides that the cost of purchase of inventories does not include taxes that are subsequently recoverable from taxation authorities.

4

Concern has been expressed that, in the absence of authoritative guidance concerning accounting for the GST in general purpose financial statements, diverse or unacceptable practice may occur or develop and that this will undermine the relevance and reliability of general purpose financial statements.

5

The issues are:

(a)            whether the GST should be recognised as part of the revenue of a supplier and as part of the cost of acquisition of assets and/or part of an item of expense of a purchaser; and

(b)            whether amounts reported in the statement of cash flows should be reported on a gross basis.