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19RU-017 AASB 1054 – What changes for you?

AASB 1054 – What changes for you?

We discuss two released amending standards impacting AASB 1054 Australian Additional Disclosures. The first impacts some not-for-profit entities currently preparing special purpose financial statements. The second principally impacts for-profit entities that prepare general purpose financial statements that assert compliance with IFRS.

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Two amendments…

The AASB has issued two amendments to AASB 1054 Australian Additional Disclosures:

  • AASB 2019-4 Amendments to Australian Accounting Standards – Disclosure in Special Purpose Financial Statements of Not-for-Profit Private Sector Entities on Compliance with Recognition and Measurement Requirements
  • AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet Issued in Australia.

AASB 2019-4 is the next step in the wider Australian financial reporting reform project currently being undertaken by the Australian Accounting Standards Board (AASB). For a summary of steps in this project refer to KPMG’s Australian Financial Reporting Framework.

AASB 2019-5 will allow for-profit publicly accountable entities to continue to claim compliance with International Financial Reporting Standards (IFRS Standards).

Not-for-profit basis of preparation

AASB 2019-4 will impact all not-for-profit (NFP) 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 NFP entity that is required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act 2001
  • each NFP entity, that has annual revenue of $250,000 or more, lodging SPFS with the Australian Charities Not-for-profits Commission (ACNC) in accordance with the ACNC Act 2012.

When considering the feedback to the comments from the exposure draft previously issued the AASB decided that the amendments in AASB 2019-4 would not apply to for-profit sector entities preparing SPFS at this time.

The required disclosures do not require NFP entities to change their existing accounting policies. They are instead based on an entity’s existing financial reporting policies and practices. Further details on the required disclosures can be found in the PDF version (PDF 123.7KB) of this Reporting Update.

The AASB see this amendment as a practical interim means of improving the quality of information provided to users of SPFS. The broader Australian financial reporting reform project is focusing on for-profit entities at present and is expected to be completed by 30 June 2020.

It is our understanding that the AASB’s deliberations on the project to remove the ability of certain NFP entities to prepare SPFS when required to comply with Australian Accounting Standards (AAS) will follow the completion of the current for-profit project. The AASB 2019-4 amendments will apply at least until that point in time.

Timing

The amendments contained in AASB 2019-4 will apply to annual reporting periods ending on or after 30 June 2020. Early application is permitted.

 “We acknowledge the consistent feedback that the AASB has received on the need to improve comparability, consistency, transparency and enforceability in SPFS.

The additional disclosures are based on an entity’s existing financial reporting and practices. The additional compliance cost should be minimal.

As an interim measure it will address (albeit to a limited extent) the AASB’s concerns on the quality of disclosures in SPFS for NFP entities.”

Michael Voogt
Director, Department of Professional Practice

Issued but not yet effective

AASB 2019-5 will impact all entities that:

  • are required to prepare financial reports in accordance with Part 2M.3 of the Corporations Act 2001
  • prepare general purpose financial statements (GPFS). 

It will principally impact for-profit entities with public accountability (as defined in AASB 1053 Application of Tiers of Australian Accounting Standards). Such entities prepare GPFS – Tier 1 financial statements.

What is now required?

AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors requires disclosure of information around the impact of new Australian Accounting Standards that have been issued but are not yet effective (paragraphs 30 and 31).

AASB 2019-5 inserts a requirement in AASB 1054 for entities to make the same disclosures for International Financial Reporting Standards (IFRS Standards) that have been issued by the International Accounting Standards Board (IASB) but where the equivalent AAS has yet to be issued by the AASB.

Disclosure of this information is important to for-profit publicly accountable entities so that they can continue to assert compliance with IFRS Standards.

Timing

The amendment contained in AASB 2019-5 will apply to annual reporting periods beginning on or after 1 January 2020. Early application is permitted.

“Given the importance in maintaining compliance with IFRS Standards we would anticipate that all entities with public accountability (GPFS – Tier1) would adopt this amendment when next reporting.”

Michael Voogt
Director, Department of Professional Practice

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