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Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities – AASB Exposure Draft ED 297



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By Jessica JohlJessica Johl

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.

Why the change?

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.

Who will be impacted?

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:

  • Not-for-profit entities (private and public sector), and
  • For-profit public sector entities.

What will change?

  • A new Tier 2 disclosure framework that applies to all Tier 2 entities:
  1. For-profit private sector entities that do not have public accountability (e.g. large proprietary companies);
  2. All not-for-profit private sector entities (e.g. charities / clubs reporting to the ACNC);
  3. Public sector entities other than the Australian Government and State, Territory and Local Governments.
  • A new set of principles and methodology to be used in determining Tier 2 disclosures based on the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs Standard), to replace the current Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements (RDR) framework.
  • New Tier 2 disclosures to be referred to as Australian Accounting Standards – Simplified Disclosures that are the result of applying those principles.
  • A new approach to presenting the Tier 2 disclosure requirements in AAS. This approach will result in a separate disclosure standard (referred to as ‘Simplified Disclosure Standard’) for entities that report under Tier 2 of the differential reporting framework set out in AASB 1053.

What is the impact?

  • 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.

Overview of the impact

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

Transitional requirements

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.

Effective date

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 Jessica Johl, our Assurance & Risk Advisory Associate Director, for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.



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