The Australian Accounting Standards Board (AASB) is conducting a post-implementation review of the 2020 reforms to special purpose financial reporting (SPFR) in the for-profit sector - ITC 56 AASB 1060. This required certain for-profit entities to transition to general purpose financial reporting (GPFR) in accordance with the full recognition and measurement requirements of Australian Accounting Standards. However, many of these entities were able to apply a new Tier 2 simplified disclosure standard – AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.

Post-implementation review of AASB 1060 and AASB 2020-2

On the whole, the removal of special purpose financial reporting introduced by AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities were well-targeted for an improvement in the consistency and comparability of financial reporting in the for-profit sector. The reforms have been broadly successful in achieving consistency and comparability of financial reporting, including for large proprietary companies.

However, concern remains that the costs are exceeding the benefits for smaller entities within the scope of these reforms. There is still a need for a simpler reporting option that offers significantly reduced recognition and measurement requirements – that is, a Tier 3 for the for-profit sector.

AASB 1060 update

We have heard from members and preparers that they value consistency in the requirements and guidance for the presentation of information between tiers. Therefore, we encourage the AASB to issue an Exposure Draft aligning the presentation requirements of AASB 18 and AASB 1060.

We also support the AASB’s planned approach and outcomes to align AASB 1060 with the third edition of the IFRS for SMEs® Accounting Standard which will address important improvements not included when AASB 1060 was developed. However, we have heard some concerns that the IFRS for SMEs Accounting Standard does not necessarily provide useful information for public sector entities applying AASB 1060. Therefore, we recommend further outreach to better understand the public sector perspectives on this topic.

Feedback has indicated that overall, AASB 1060 adequately services the simplified disclosure needs of most Tier 2 entities who have no need to claim that their financial statements comply with IFRS Accounting Standards. Therefore, there is limited stakeholder interest for IFRS 19 Subsidiaries without Public Accountability: Disclosures (IFRS 19), the IASB’s voluntary reduced disclosure standard, to be adopted into the Australian Accounting Standards Framework.