21RU-008 Tier 2 transition relief for Not-for-profit entities

21RU-008 Tier 2 transition relief for NFPs

The AASB has approved amendments to provide limited comparative information relief for not-for-profit (NFP) entities adopting AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities early when transitioning from Tier 1 or Tier 2 – Reduced Disclosure Requirements to Tier 2 – Simplified Disclosures.


Relief from presenting comparatives

The AASB has issued AASB 2021-1 Amendments to Australian Accounting Standards – Transition to Tier 2: Simplified Disclosures for Not-for-Profit Entities. AASB 2021-1 provides a not-for-profit (NFP) entity that prepares general purpose financial statements (GPFS) certain transition relief where it elects to adopt AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities early, for example for 30 June 2021.

The amendments provide relief from having to present comparative information in the notes to the financial statements when first applying GPFS-Tier 2 Simplified Disclosures (SD) where the NFP entity did not previously disclose the comparable information in its most recent previous GPFS (Tier 1 or Tier 2 prepared under the Reduced Disclosure Requirements (RDR)). The relief only applies where AASB 1060 is adopted early, i.e. to annual reporting periods beginning before 1 July 2021.

The amendments addressed the anomaly that a for-profit entity transitioning from Tier 2-RDR to Tier 2-SD could avail itself of such relief (as contained in AASB 1053 Application of Tiers of Australian Accounting Standards Appendix E.E4), whereas an NFP entity was not afforded the same transition relief.

AASB 2021-1 also amended AASB 1053 to highlight that the relief set out in Appendix E of AASB 1053 is available only to for-profit private sector entities.

Effective date

The amendments will apply to annual periods beginning on or after 1 July 2021, with earlier application permitted, provided AASB 1060 is also applied to the same period.

Transition relief only available when early adopting

The transition relief does not apply where an entity (whether for-profit private sector or NFP) transitions from GPFS (Tier 1 or Tier 2 RDR) to GPFS-Tier 2 SD where AASB 1060 is first applied from its effective date of annual reporting periods beginning on or after 1 July 2021.

This means that to avail itself of the transition relief, a NFP needs to early adopt both AASB 1060 and AASB 2021-1.

Transition relief: Applying AASB 1060

NFP versus for-profit entity

The amendments have not extended all the transition relief available to for-profit entities resulting from the changes to the Australian Financial Reporting Framework for for-profit private sector entities. These were the changes that removed the ability for certain for-profit private sector entities to prepare special purpose financial statements effected by the issue of AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities. These amendments work in conjunction with AASB 1060. Further explanation and details of the suite of transition relief can be found in 20RU-006 Farewell SPFS… Welcome Simplified Disclosures.

The PDF version of the Reporting Update sets out the available transitional relief, at a glance, for for-profit private sector entities and NFP entities, depending on the period to which the amendments are first applied.

“The other transitional reliefs available for for-profit private sector entities were considered appropriate by the AASB in the context of the removal of the ability for such entities to continue to prepare special purpose financial statements on the settling of the for-profit private sector Australian Financial Reporting Framework. As the NFP Financial Reporting Framework is still being deliberated, extending the other transitional reliefs was not considered appropriate at this time due to the potential loss of useful, restated comparative information.

An NFP entity seeking to change from preparing special purpose financial statements to general purpose financial statements will currently need to apply the requirements, including disclosures set out in AASB 1060.”

Michael Voogt


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