Date posted: 16/06/2022

Can I still prepare special purpose financial statements?

A guide to navigating the new for-profit financial reporting framework in Australia

In brief

  • AASB’s special purpose reforms affecting for-profit entities are mandatory from 30 June 2022
  • CA ANZ and CPA Australia have prepared a joint guide to help entities transition if they need to do so
  • The reforms have been narrowly targeted so many smaller entities are unaffected

A new guide has been released explaining how the Australian Accounting Standards Board’s (AASB) for-profit framework reforms impact the use of special purpose reporting in this sector for 30 June 2022 year end.

The guide, Can I still prepare special purpose financial statements?, was produced by CA ANZ in conjunction with CPA Australia and HLB Mann Judd to assist financial statement preparers and auditors understand and apply the changes to individual entities. 

The guide uses a flowchart and detailed commentary to help entities navigate the complex application clauses of the reform to identify whether their reporting practices need to change.

This complexity has been caused by both the enormous variety of wording used in Australian legislative and other reporting requirements in the for-profit sector, and to ensure that only those entities where there is a recognised user or regulator need for general purpose rather than special purpose financial statements are required to transition.

In response, the AASB has carefully targeted the reforms, meaning that only some for-profit entities are impacted. These include, but are not limited to, large proprietary companies (based on the increased thresholds applied in 2019), small proprietary companies subject to foreign control or involved in crowd source equity funding, unlisted public companies (except those limited by guarantee), AFSLs, cooperatives and mutuals.

If a transition from special purpose to general purpose reporting is now required, the guide explains what the next steps in the transition journey are and points to further resources that can assist in that process.

The scale of that transition process depends on the accounting polices already adopted and how closely they align with the recognition and measurement requirements of Australian Accounting Standards. This is because compliance with these standards is now mandatary under the new Tier 2 reporting requirements.

However, the reforms also offer disclosure relief, with a new simplified disclosure standard (AASB 1060) now applying to entities preparing Tier 2 GPFS. AASB 1060 replaces the AASB’s reduced disclosure regime (RDR) requiring less disclosure than RDR because it is based more closely on the IASB’s IFRS for SMEs standard. Since it replaces RDR, entities already doing Tier 2 GPFS, including not-for-profits will also need to apply AASB 1060 to their GPFS this financial year.

The AASB is now progressing further framework reform for the not-for-profit sector with a discussion paper on its proposals, including a Tier 3 with simplified recognition and measurement requirements, due out later this year.

Our Reporting and Assurance Newsletter will keep you up-to-date with developments as they occur, and member feedback, which was critical to ensuring the for-profit reforms struck the right balance, will again be vital.

Reforming the use of special purpose reporting

The results from CA ANZ's member survey on special purpose.