1.1 International definition of SME and the difference between the differential reporting regime currently existing in Australia According to the IASB ED of a proposed IFRS for SMEs, the IASB definition of SME is intended to (a) an entity with no public accountability, and (b) an entity that publishes general financial statements for external users. If entities fall within the definition of public responsibility, as indicated in paragraph 1.2 ED, they are not entitled to use the proposed IFRS for SMEs. The IASB's definition of public accounting is not based on the determination of a size threshold; rather it is the fact that an entity has issued equity or debt securities in a public market and therefore must file financial reports with external regulatory organizations or an entity holds assets in trust for a large group of outsiders. Furthermore, criterion (b) of the international definition is fundamentally a matter for each national jurisdiction to decide whether entities without public accountability should be required to create general purpose financial statements. In contrast, the currently existing Australian differential reporting regime is based on the “reporting entity concept” which can be understood as the core element of the Australian financial reporting framework. This means that an important factor in determining the applicability of accounting standards is the concept of reporting entity. Reporting entities must, regardless of their size and legal status, comply with all accounting standards. In principle, small and large reporting entities are essentially subject to the same financial reporting regime. As the IASB ED clearly will not apply to listed entities, it is necessary to examine the Australian accounting requirements for unlisted (proprietary) entities and how these requirements differ from the international definition. Whether unlisted entities are subject to the accounting requirements of the Corporations Act 2001 depends on whether they are classified as small or large, so a size threshold test will be used. Under section 292(2), 293 and 294 Corporations Act, small proprietary companies are not required to prepare and submit financial reports unless there is a requirement by ASIC or they are directed by a vote of 5% of their shareholders, or are controlled by a foreign company. The IASB ED does not distinguish between for-profit entities and non-profit entities. Therefore, considering the current reporting requirements that exist for SMEs in Australia and the international definition, there is a significant