Trilogy may hurt some high-value producers

CORPORATIONS Law changes will forcemany businesses to disclose their profit margins in this financial year’s reports.

The reporting change is due to Australian Accounting Standard 1018 – also known as Trilogy – which came into effect at the beginning of the 2000-01 financial year.

Businesses required to report will have to disclose the cost of sales plus expenses and revenues from ordinary activities.

Despite almost one year’s notice, many businesses and accountants appear to be unaware of the change.

Accountants are critical, saying it requires companies to disclose commercially sensitive information.

The Australian Accounting Standards Board brought in the new standard in an attempt to harmonise Australia’s reporting rules with international accounting standards.

But important investment markets such, as the UK and the US, do not adhere to these standards. In their jurisdictions, cost of sales include shop rents and other overheads.

It is understood small private companies will be exempt from the standard, but these make up a minority of the incorporated entities.

These companies need to meet two of three requirements. Either their gross consolidated operating revenue is less than $10 million; the value of consolidated gross assets at the end of the financial year is less than $5 million; or the company and the entities it controls have less than 50 employees at the end of the financial year.

AASB chairman Keith Alfredson said attention may have been drawn from the new standard’s introduction by “other tax issues”. Mr Alfredson said the AASB’s approach would be to see what happened after this reporting period and decide whether the standard needed to be modified.

Australian Securities and Investments Commission chief accountant Ian Mackintosh said interpretation of the standard appeared to be the biggest problem.

“If there is real confusion we’ll need to see how we can clear it up,” he said.

Accounting firm Deloitte Touche Tohmatsu partner Greg Wheeler said the new standard was another administrative headache.

“We have a number of clients with competitors that are not incorporated entities that are concerned about the changes,” Mr Wheeler said.

“This will provide competitors with previously confidential infor-mation on the company’s operating cost structures.”

Companies which produce low numbers of high value goods each year, such as WA shipbuilder Austal Ships, will be among those hit hardest by the new standard.

Austal managing director Bob McKinnon said he believed the new standard would be a big impost.

“This is going to give a lot of information to our competitors and customers,” he said.

“I can’t see how giving out this information is going to help our shareholders.”

CPA Australia WA director Justin Walawski said he feared the new rule was largely unrecognised.

“I don’t think people have sat down and though about how the new standard will affect them,” Mr Walawski said.

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