This Australian Accounting Standards Board (AASB) project aims to make the financial reporting framework clearer and simpler. The AASB’s work is evidence based, with substantial efforts being directed toward research on existing practices and extensive stakeholder consultation. CA ANZ is an active participant and encourages members to become involved.

The project is addressing each of the following three sectors successively.

For-profit private sector  

In early 2020, the AASB completed its for-profit framework reform by amending SAC 1 Definition of the Reporting Entity to remove the ability of certain for-profit entities to lodge special purpose financial statements with regulators. Instead impacted entities must now prepare a Tier 1 or 2 general purpose financial report that applies all the recognition and measurement requirements of all accounting standards (including consolidation and equity accounting as appropriate). However, disclosure relief is provided for Tier 2 through a new simplified disclosure standard (AASB 1060) that replaces the AASB’s Reduced Disclosure Regime. These reforms apply to financial years beginning on or after 1 July 2021 and are currently the subject of a post-implementation review. 

Not-for-profit private sector

The AASB’s framework reform project in the not-for-profit (NFP) sector is now in its implementation phase with the issue of the new Tier 3 NFP standard applicable from 1 July 2029 (early adoption permitted). For smaller NFP entities, the AASB Tier 3 standard will be a general purpose financial report with simplified recognition and measurement requirements and even further reduced disclosures, as an alternative to special purpose financial statements for these entities. The Tier 3 standard will apply to NFPs with legislative or constitutional reporting requirements that require compliance with accounting standards. NFPs preparing Tier 2 general purpose financial statements were required to transition to the AASB’s Tier 2 simplified disclosure standard (AASB 1060) in 2021, and may evaluate whether they are eligible to apply the Tier 3 standard. Further clarity on its application will need to be provided by the relevant NFP regulators.

Public sector

The AASB has released Research Report No. 6: Financial Reporting Requirements Applicable to Australian Public Sector Entities which benchmarks Australian public sector financial reporting with seven comparable jurisdictions internationally. This has been followed by a discussion paper; Improving Financial Reporting for Australian Public Sector Entities that sets out possible options for a way forward. The AASB intends to use this paper to encourage discussion amongst key stakeholders. More formal work on reform in this sector will commence after the NFP framework reform project concludes.