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20RU-006 Farewell SPFS… Welcome Simplified Disclosures

20RU-006 Farewell SPFS… Welcome Simplified Disclosures

The most significant change in the AASB’s Australian financial reporting reform project has been achieved. The AASB has released amendments to remove the ability of certain for-profit private sector entities to prepare special purpose financial statements. These amendments will work in conjunction with the new GPFS-Tier 2 Simplified Disclosures standard.

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Special purpose gone and a new Tier-2 disclosure standard

Phase Two of the Australian Accounting Standards Board (AASB) approach to adopting the revised Conceptual Framework for Financial Reporting has been achieved.

The ability of certain for-profit private sector entities to prepare special purpose financial statements (SPFS) has been removed. These entities will be required to prepare a form of general purpose financial statements (GPFS). The amendments (set out in AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities) were approved by the AASB in March 2020. These amendments will work in conjunction with the new GPFS-Tier 2 SD standard, AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.

Both AASB 2020-2 and AASB 1060 will apply for financial reporting periods beginning on or after 1 July 2021, with early adoption permitted. Both standards need to be applied at the same time.

The mandatory application date is a year later than was proposed in the Exposure Drafts relating to the standards. As a consequence, the transitional relief available will depend on whether the entity chooses to apply the requirements early.

Both AASB 2020-02 and AASB 1060 make consequential amendments to various Standards, including amending the applicability of the ‘reporting entity’ definition in AASB 1057 Application of Australian Accounting Standards.

Our Reporting Update (PDF 662.3KB) provides further details and explanations of:

  • the entities impacted by the removal of SPFS in the for-profit private sector
  • the transitional relief available
  • which entities can apply the single GPFS-Tier 2 SD standard, AASB 1060
  • key features of AASB 1060
  • how AASB 1060 differs to both current SPFS and GPFS-Tier 2 RDR.

 

“For those for-profit entities not in scope, SPFS may continue to be prepared. The AASB has stated that it expects that the directors or those charged with governance will need to consult with their user needs to determine an appropriate basis of preparation (including selection of appropriate accounting policies) when next preparing financial statements. This may be consistent with the most recent SPFS.

The issue is that the directors or those charged with governance will need to establish a process for the above consultation with users. This process should consider all users of the financial statements including owners, bankers, creditors, employees and any applicable regulators. The process will need to be robust and should be reconsidered each time the entity prepares financial statements.”

Michael Voogt
Director, Department of Professional Practice

More resources

A broader understanding and more details of the Australian Financial Reporting Framework project is available on our dedicated webpage at www.kpmg.com/au/gpfs.

We will be releasing more resources to support your implementation of these two standards. Watch this space!

© 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Liability limited by a scheme approved under Professional Standards Legislation.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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