- Over 500 professionals involved in the financial reporting supply chain responded to our special purpose reporting survey
- They provided views of whether and how the use of special purpose reporting should be changed and the expected costs of transition
- Their feedback supports the general direction of the latest Australian Accounting Standards Board (AASB) reform proposals contained in EDs 295 and 297
Over 500 accounting and finance professionals, mostly members provided views to CA ANZ's special purpose reporting survey conducted in July/August 2019. Each had practical involvement in the financial statement supply chain in the for- profit or not-for-profit sector and their views have been, and will be, crucial in informing our feedback to the AASB's current and future financial reporting reform projects.
What the survey told us
Respondents indicated that their use of special purpose reports was widespread. Over 60% were therefore concerned that the scope of the initial AASB proposals (consulted on via ITC 39) proposed change where the costs would outweigh the benefits. They also identified costs of between $501-$5000 per set of financial statements for transition and only 33% were confident they had the internal resources available to transition.
Over 60% of for-profit and over 80% of not-for-profit respondents sought simplified recognition and measurement in any special purpose replacement, while reduced disclosure was sought by over 70% of respondents. Over 65% saw a role for the IFRS for SMEs standard in our framework.
The current AASB proposals
Our survey preceded the mid-August release of the AASB's revised proposals for the for-profit sector. Its two ED's, which closed for comment in late November, were:
- ED 295 General Purpose Financial statements – Simplified Disclosures for For-Profit and Not-for-profit Tier 2 entities; and
- ED 297 Removal of Special Purpose Financial Statements for Certain For-profit Private Sector Entities.
ED 297 proposed to remove the ability of only some for-profit entities to use special purpose financial statements as a regulatory lodgment option. These entities are principally companies lodging under the Corporations Act, Australian Financial Services Licensees, higher education providers and some cooperatives. Without SAC 1 Definition of the Reporting Entity permitting them to identify as "non-reporting entities" they will need to lodge a Tier 2 general purpose financial report that complies with the recognition and measurement requirements of all AASB standards. However, this report will be able to use a new Simplified Disclosure Standard based even more closely on the IFRS for SMEs standard than the current reduced disclosure regime (under AASB 1053). Details of that standard were exposed as ED 295.
Our submission response
The feedback discussed above clearly shows that the AASB's revised reforms are clearly heading in the right direction for the for-profit sector.
Therefore, our submissions on both these EDs, prepared jointly with CPA Australia, has supported these changes, subject to calling for a two-year implementation window rather than the accelerated 2021 adoption date currently planned. This is consistent with the survey feedback about the extent, cost and complexity of the change.
CA ANZ's advocacy to the AASB has already been integral to ensuring that reform outcomes will be proportionate and reasonable in the for-profit sector. However, will continue to work with the AASB to inform and educate our members as the changes are implemented and address any post implementation concerns, which will be inevitable in a reform of this complexity.
Our advocacy will now shift to the NFP sector where our responses to the AASB's planned consultation next year will be informed by the NFP aspects of our survey.
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Joint submission ED 295: GPFS – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities
Read the joint submission ED 295 here.Read More
Joint submission ED 297: Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities
Read the joint submission ED 297 here.Read more
Would you like to contribute to surveys like this?
This survey was conducted with the CA ANZ Member Insights Panel. If you’re a member of CA ANZ and would like to contribute your views to surveys like this in the future, then join us.Join our Member insights Panel
Where to now for special purpose reporting reform?
Survey results released and submissions lodged.Read more