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In August 2019, the Australian Accounting Standards Board (AASB) released exposure draft ED 297 ‘Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities’ (the ED). The proposals in the ED have been made in conjunction with ED 295 ‘General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities’, with the objective of promoting comparability, transparency and enforceability of financial reporting.
Australia is the only country that permits entities to self-assess their financial reporting requirements and prepare special purpose financial statements. While other countries have a separate financial reporting framework (non-IFRS), this is not an option in Australia.
In order to align with the international framework, and remain compliant with the International Financial Reporting Standards (IFRS), we are needing to update our current framework. Comparability and understandability of our financial reports need to be internationally recognised to allow our businesses to remain competitive.
At this stage, the changes will only apply to for-profit private sector entities that are required by:
Accordingly, the proposals do not apply to:
A new Tier 2 disclosure framework that applies to all Tier 2 entities:
The minimum requirements proposed for general purpose financial statements (GPFS) is a new Tier 2 GPFS framework which requires compliance with all R&M requirements in AAS, and simplified disclosures based on the IFRS for SMEs Standard. An entity may voluntarily elect to prepare Tier 1 GPFS, consisting of full recognition, measurement and disclosure;
All for-profit private sector entities lodging financial statements with the Australian Securities and Investments Commission (ASIC) will prepare some form of GPFS;
All for-profit private sector entities required by other Australian legislation to prepare financial statements in accordance with AAS or accounting standards will prepare some form of GPFS; and
All for-profit private sector entities that are trusts, partnerships, joint arrangements or self-managed superannuation funds, as well as entities subject to other requirements that have constituting or other documents (such as lending agreements) created or amended on or after 1 July 2020 that specifically require financial statements to be prepared in accordance with AAS, will prepare some form of GPFS.
Entity | Existing framework | New framework | Impact |
---|---|---|---|
For-profit entity with public accountability | Tier 1 | Tier 1 | None |
For-profit entity reporting entity without public accountability | Tier 2 (RDR) | Tier 2 (SD) | Reduction in disclosure, partially offset by some new disclosure |
Not-for-profit entities preparing Tier 1 financial reports | Tier 1 | Tier 1 | None |
Not-for-profit reporting entities preparing Tier 2 financial statements | Tier 2 (RDR) | Tier 2 (SD) | Reduction in disclosure, partially offset by some new disclosure |
Not-for-profit non-reporting entities | SPFS | SPFS | None |
Amendments will be made to AASB 1 First-time Adoption of Australian Accounting Standards so that entities preparing GPFS under the Tier 2 requirements for the first time would not need to restate or present comparative information as otherwise required by AAS.
It is proposed that this Standard would be applicable to annual reporting periods beginning on or after 1 July 2020, with earlier application permitted.
If you have any further questions about the AASB exposure draft please contact our Audit & Assurance team here at Vincents for assistance.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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