For-profit accounting changes mandatory from 30 June 2022
CA ANZ members were heard regarding a new reporting framework being implemented by the Australian Accounting Standards Board.
- Australian Accounting Standards Board’s reforms are mandatory from 30 June 2022.
- Reforms have been narrowly targeted so many entities are unaffected.
- CA ANZ member feedback was valuable in shaping final reforms.
Over the past five years, the Australian Accounting Standards Board (AASB) has been developing a more consistent and clear reporting framework in the for-profit sector. CA ANZ have been actively engaged with the AASB to ensure the final framework meets user needs in a way that does not place an unreasonable burden on preparers. This framework is now in place and becomes mandatory for the financial year ending 30 June 2022.
Feedback from chartered accountants
CA ANZ’s advocacy on these changes is to ensure this initiative cost effectively achieved its aims. This message reflected the results of our 750+ member special purpose survey which revealed that 82% of the respondents had for-profit entities using special purpose financial statements (SPFS) and that 60% were concerned that the costs of removing SPFS would outweigh the benefits. 70% of respondents were concerned that the disclosure requirements of the existing Tier 2 GPFS (general purpose financial statements) framework were excessive for many entities.
In response, the AASB carefully targeted its reforms so only some for-profit entities must now transition away from preparing SPFS to preparing GPFS. These entities are the ones for whom there is a recognised user or regulator need for GPFS, making it appropriate that these reports comply in full with the recognition, measurement, presentation and disclosure requirements of the Australian accounting standards (AAS).
A simplified framework
The AASB also listened to the disclosure concerns and developed a new simplified disclosure framework for the Tier 2 GPFS that entities transitioning away from SPFS will now need to prepare. These new disclosure requirements are contained in a new standard (AASB 1060) which also replaces the AASB’s current reduced disclosure regime (RDR) and are based closely on the International Accounting Standards Board’s (IASB) international financial reporting standards (IFRS) for SMEs standard, which members indicated support for in the survey.
Due to the complexity of the reforms, CA ANZ in conjunction with CPA Australia have prepared a guide that will assist members to understand if they or their clients need to transition and, if so, what the next steps are. Can I Still Prepare Special Purpose Financial Statements? A Guide to Navigating the new for-Profit Financial Reporting Framework in Australia. It provides an overview of the reforms, including a visualised flowchart and more detailed discussion of how the changes affect a wide variety of impacted for-profit entity types.
A resource for not-for-profit entities too
The guide will also be useful for private sector not-for-profit (NFP) entities, explaining the impact the for-profit reforms have already had on NFP reporting ahead of the exposure of more detailed proposals for NFP framework reform later this year. CA ANZ will continue to ask for feedback from, and advocate on behalf of members as the NFP financial reporting framework project develops and we welcome your input.
There has certainly been a clear effort to make these reforms cost effective and chartered accountants have been heard by the standard setter – but the proof will be in the pudding. Now is the time for monitoring and feedback on both what works well, and where there are issues and complexity so these can be refined during the post implementation review process. In the meantime CA ANZ continues to liaise with special regulators, such as ASIC, to ensure necessary guidance on implementation issues is provided.
Can I still prepare special purpose financial statements?
A guide to navigating the new for-profit financial reporting framework in AustraliaRead more