Date posted: 06/07/2022 5 min read

Going from special purpose to simplified disclosures

Preparers shifting from special purpose financial statements to simplified disclosures may find it easier to ditch existing templates and start afresh. Brought to you by Accurri.

Much of the discussion about AASB 1060 simplified disclosures reporting has been on how the standard will benefit those businesses that move from general purpose financial statements to simplified disclosures. However, the flip side – moving from special purpose financial statements to simplified disclosures – appears to have largely been ignored.

The new framework’s requirements will certainly be top of mind for accountants preparing financial statements beginning on or after 1 July 2021. However, without proper preparation, they can expect a bumpy ride ahead.

The road to simplified disclosures

In 2018, the Australian Accounting Standards Board (AASB) changed its definition of a “reporting entity” to more closely align with that used by the International Accounting Standards Board (IASB). As a result, a significant number of Australian businesses that had previously been able to report with special purpose financial statements now had to report with more complex general purpose financial statements.

Responding to widespread concern over the change – including 2019 survey feedback from CA ANZ – the AASB permitted Tier 2 entities to report using the AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities standard.

But as some early adopters have already found out, simplified disclosures are better described as different – not simpler or shorter.

Who is affected?

The number of businesses making the transition to simplified disclosures is set to grow considerably this financial year, as AASB 1060 becomes mandatory. Financial reporting software developer Accurri analysed 3300 proprietary company financial statements prepared in 2021. Its research found that only 15% were prepared under the general purpose framework, 11% were early adopters of simplified disclosure statements, 23% used reduced disclosure requirements, while more than half – 51% – were special purpose financial statements.

“This means that about 85% of all financial statements prepared in 2022 could use the simplified basis of preparation, and 74% of businesses may not be able to roll forward their 2021 financial statements using their existing templates,” says Michael Berrington, director at Accurri and Financial Reporting Specialists (FRS).

“Up to 74% of businesses may not be able to roll forward their 2021 financial statements using their existing templates.”
Michael Berrington, Accurri

While accountants using solutions such as Accurri can just select simplified disclosures and allow the software’s AI to generate a compliant statutory financial report, preparers who are using Word and Excel should allow extra time to review the new reporting requirements and revise their templates.

“In our view, the simplified disclosures framework is going to disrupt special purpose financial statement templates and practices so severely that preparers may be best advised to start their simplified disclosures financial statements anew,” Berrington says.

Making the switch

Some accountants will be in a better starting position than others to make the changes required by the new simplified disclosures framework. Since the current framework for special purpose financial statements was introduced in 2005, preparers have adopted two main, broad approaches:

  • Minimal disclosure: meeting the disclosure requirements of five accounting standards, being the four primary statements, and notes detailing some breakdowns of the primary statements
  • Near-full IFRS compliance: over-disclosing beyond the framework requirements, including income tax disclosures, reconciliations such as plant and equipment, movements in provisions, information on borrowings, movements in reserves, contingent liabilities, commitments and related party transactions.

“For financial statements prepared in line with the minimalist approach, preparers can expect a significant increase in disclosure requirements,” says Berrington. “You could expect the size of simplified disclosures financial statements to be double that of a special purpose set.”

For financial statements prepared with near-full IFRS compliance, the increase will not be as dramatic but preparers should still be aware of additional requirements, such as the inclusion of disaggregation of revenue, financial instruments, fair-value measurements, key management personnel remuneration and share-based payments.

Adapting to change

Accounting standards change all the time. When preparers get used to simplified disclosures financial statements, the process will soon become as familiar as the special purpose process was, Berrington says. Accountants should just be aware that it won’t be any simpler – especially in the first reporting period.

“Regardless of which approach has been used historically, each set of special purpose financial statements will need to be analysed in order to quantify the magnitude of change,” he observes. “Be ready, and start preparing the accounts sooner rather than later.”

The AASB’s Simplified Disclosures standard

The AASB’s Simplified Disclosures standard is based on the IFRS for SMEs standard that is currently being reviewed by the IASB, with an exposure draft of the second review anticipated in late 2022. Areas preparers should be particularly mindful of include:

  • Disaggregation of revenue
  • Income tax breakdowns (income tax expense, deferred tax asset and deferred tax liability)
  • Details of financial asset and financial liability fair-value measurements
  • Investment properties: reconciliation, valuations and lessor commitments
  • Land and buildings: valuations
  • Right-of-use assets: additions during the period and details of agreements
  • Descriptions of hedges and nature of risks being hedged
  • Borrowings information (total secured liabilities, assets pledged as security, financing arrangements and terms and conditions of long-term debt)
  • Lease liabilities: future lease payments
  • Key management personnel disclosures (aggregate

Find out more:

Visit to register for complimentary PDFs of Accurri’s Example Financial Statements, fully referenced to AASB 1060. There is also a guide that includes a page-by-page comparison of special purpose financial statements compared with simplified disclosures financial statements – helping you see what’s changing and what’s staying the same.

Accurri’s Example Financial Statements