Date posted: 20/03/2020

Australia’s financial reporting changes approved

AASB approves framework reform affecting special purpose reporting for certain for-profit entities

In brief

  • AASB will remove special purpose financial reports as an option that certain for-profit entities can use to lodge a financial report with a regulator
  • The reforms will be mandatory for the financial years from 1 July 2021
  • Specific transitional provisions and a supporting Simplified Disclosure Standard are available to encourage early adoption

The AASB’s March meeting approved plans to remove the ability of certain for-profit entities to lodge special purpose financial reports with regulators for financial reporting periods beginning on or after 1 July 2021. 

The scope of the reforms is limited to entities with financial reporting requirements that specify compliance with accounting standards, particularly capturing large proprietary companies, financial services licensees, small proprietary companies with foreign ownership or those that engage in crowd-sourced equity funding, cooperatives and some trusts.

Instead, these entities will be required to lodge a Tier 2 general purpose financial report that must adopt all the recognition and measurement requirements of existing accounting standards. 

However, disclosures will be governed by a new Simplified Disclosure Standard that will replace the existing Reduced Disclosure Regime (RDR). This will allow entities already using RDR (both for-profits and not-for-profits) to benefit from significant disclosure reductions. 

Transitional provisions designed to encourage early adoption are included in the reforms, but they are available only to early adopters in either the 30 June 2020 or 30 June 2021 financial years. 

Without early adoption, the required special purpose financial statements will need to make disclosures about compliance with the recognition and measurement requirements (including consolidation and equity accounting). The board is still finalising these disclosure requirements, but they will be based on the proposals they exposed in ED 293.

The reform proposals are consistent with the messages received from members in our financial reporting reform survey last year and our submissions to the relevant EDs 295 and 297. We therefore encourage preparers and auditors who deal with entities within the scope of the reforms to familiarise themselves with the changes and to consider the most suitable transition option for them.

More details can be found on the AASB website, including both AASB 2020-2  and AASB 1060 which are now available ( see below). 

CA ANZ will also provide education sessions and other resources, which will be published in our Reporting and Assurance News newsletter as they become available.

AASB 2020-2 Key Facts

Key facts: AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities

Read more

AASB 1060 Key facts

Key facts: AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Entities

Read more

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