20RU-009 Large proprietary company still preparing SPFS?

20RU-009 Large proprietary company still preparing SPFS

Recent commentary by ASIC, AASB and others has raised issues around the ability of large proprietary companies to continue preparing special purpose financial statements (SPFS). This Reporting Update discusses the concerns raised and charts a course of action that large proprietary companies may consider when determining whether to prepare general or special purpose financial statements for financial reporting years beginning on or after 1 July 2019.


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In summary

In April 2019 the government registered the Corporations Amendments (Proprietary Company Thresholds) Regulations 2019. Details of this change are discussed in 19RU-004 Proprietary company threshold: When large becomes small.

The new regulation doubles the thresholds for determining whether a company is a large or small proprietary company for a financial year. A proprietary company is large if it meets two of the three thresholds at the end of its financial year. Otherwise it is small. The table below outlines the three thresholds.

Threshold Financial years beginning before 1 July 2019 Financial years beginning from 1 July 2019
Consolidated revenue for the financial year * $25 million or more $50 million or more
Consolidated gross assets at the end of the financial year * $12.5 million or more $25 million or more
Employees^ of the company and the entities it controls 50 FTE employees
or more
100 FTE employees or more

*For the company and any controlled entities
^Part-time employees are counted as an appropriate fraction of the full-time equivalent (FTE)

The above change applies in relation to financial years beginning on or after 1 July 2019 – i.e. 30 June 2020 year ends.

Call to action

The explanatory statement to the regulation change and subsequent commentary by both the AASB and ASIC has raised the issue around the ability of proprietary companies that remain large to continue preparing special purpose financial statements (SPFS) – before the effective date of the changes in AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities.

“For those large proprietary companies that are planning to prepare SPFS for 30 June 2020 reporting dates the directors should re-evaluate their reporting entity status in light of the above commentary.

The AASB has stated that it expects that the directors or those charged with governance will need to consult with their users 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 undergone each time the entity prepares financial statements. We would recommend that this process be appropriately documented.”

Michael Voogt
Director, Department of Professional Practice


Further detail can be found in our Reporting Update 20RU-009 (PDF 944.6KB) including discussion on:

  • options available for 30 June 2020 reporting dates
  • guidance to assist in your reporting entity evaluation
  • transitioning from SPFS to GPFS
  • implementing AASB 2020-2 for annual reporting periods beginning on or after 1 July 2021.

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