The lifecycle of an Australian accounting standard is a long one.
We actively monitor developments to understand and communicate the impacts on our clients — and the wider economy.
You can do a lot in the lead up to the issuance of a new accounting standard to ensure efficient and effective application. We work with clients to get their processes and reporting into a position for a smooth transition.
The future of special-purpose financial statements in Australia
During 2020, the Australian Accounting Standards Board issued two standards:
- AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities
- AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities.
Head of National Assurance QualityContact Merilyn
Both standards drive towards a common goal – forcing consistency in for-profit financial reporting, particularly as it relates to the application of accounting standards in the presentation of financial statements. They also provide a simplified framework for the preparation of general-purpose financial statements for Tier 2 entities (as defined in AASB 1053 Application of Tiers of Australian Accounting Standards).
These standards are effective for financial periods ending on or after 30 June 2022 but may be adopted early. If adopted for the financial period ended on or after 30 June 2022, the comparative period (e.g. the year ended 30 June 2021) must be restated.
Entities that are required to prepare audited financial statements in accordance with the Corporations Act 2001 will experience the most significant impact due to removal of the current “Special Purpose Financial Statements” regime. AASB 1060 replaces it with a new, expanded framework based on the internationally developed “IFRS for SMEs”. In a significant change, consolidation is mandatory for all entities considered ‘controlled’ upon application of AASB 10 Consolidated Financial Statements.
Certain large groups that previously limited their financial statement preparation to parent-only financial information will be required to disclose additional public information that will need a level of planning effort to ensure that financial records as of the date of initial adoption are of a sufficient standard. It may also involve early coordination with the auditor to ensure the auditor, if required, attends procedures such as stock takes.
For assistance in considering the impacts of this change in legislation on your entity, or for further discussion regarding potential impacts, please feel welcome to contact our Financial Reporting Advisory team – FRA@au.gt.com.