The AASB has issued Exposure Draft 293 Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Compliance with Recognition and Measurement Requirements (ED 293). It is the next step in the wider Australian financial reporting reform project currently being undertaken by the Australian Accounting Standards Board (AASB).

The wider project is to implement the Conceptual Framework for Financial Reporting (RCF) in Australia. For a summary of steps in this project refer to the Appendix (PDF 297.8KB).

ED 293 proposes to amend AASB 1054 Australian Additional Disclosures. It will impact all entities preparing special purpose financial statements (SPFS) that are required, through legislation, to comply with AASB 101 Presentation of Financial Statements and AASB 1054. This includes:

• each entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act 2001
• each entity lodging SPFS with the Australian Charities Not-for-profits Commission (ACNC) in accordance with the ACNC Act 2012.

The disclosures proposed by ED 293 do not require entities to change their existing accounting policies. They are instead based on an entity’s existing financial reporting policies and practices.

At a high level the proposals cover disclosure of information about the compliance with the recognition and measurement (R&M) requirements in Australian Accounting Standards. More specifically, an entity preparing SPFS must cover the following three areas.

The basis on which the decision was made to prepare special purpose financial statements will be required to be disclosed.

Where the entity has investments in subsidiaries, associates or joint ventures, an entity will be required to disclose whether they have been consolidated or equity accounted as appropriate, in accordance with Australian Accounting Standards. If not consolidated or equity accounted, an explanation of why not is required. If the entity is a NFP entity, and hasn’t undertaken this assessment, it would instead disclose this fact.

An entity must disclose whether the accounting policies applied in the financial statements comply with all the R&M requirements in Australian Accounting Standards, and if not, an indication of where they do not comply.

Importantly the extent of any non-compliance does not need to be quantified. This is deliberate as the AASB is not aiming to make the required disclosures onerous.

Alternative example wording where an entity has not applied all R&M is contained in the ‘Implementation guidance and illustrative examples (PDF 891.8KB)’ section of ED 293.

The AASB see the amendments in ED 293 as a practical interim means of improving the quality of information provided to users of SPFS. The broader Australian financial reporting reform project still proposes to address the problems of SPFS – by removing that ability for certain entities to prepare SPFS when they are required to comply with Australian Accounting Standards.

Further discussion around the proposals can be found in the PDF version of the Reporting Update.

The AASB’s current expectation is that the amending standard proposed by ED 293 will be effective for annual periods ending on or after 30 June 2020.

Submissions on ED 293 are due by 19 August 2019.

The AASB encourages all stakeholders to submit comments via the AASB website, LinkedIn or email.