The ability of many for-profit entities to prepare special purpose financial statements has been removed with effect from 1 July 2021. In addition, a new ‘Tier 2 ‘Simplified Disclosures’ Standard generally provides disclosure relief compared to the existing 'Reduced Disclosure Requirements'.
The reporting entity concept has been a long-term feature of the Australian financial reporting landscape. Its removal represents a major change to prior practice
Many private sector for-profit entities will be required to prepare general purpose financial statements (GPFS), including:
Entities preparing financial statements under the Corporations Act 2001 or other legislation that are required to comply with Australian Accounting Standards or ‘accounting standards’, such as large proprietary companies, unlisted public companies and small foreign-controlled proprietary companies
Trusts, partnerships and similar entities where the constituting document or another document (such as a loan agreement) requires preparation of financial statements in accordance with Australian Accounting Standards – where these documents are created or amended on or after 1 July 2021
Any for-profit entity that chooses voluntarily to prepare GPFS
The existing Reduced Disclosure Requirements (RDR) are replaced with new Simplified Disclosures to be used by Tier 2 entities (both for-profit and not-for-profit entities) that have fewer disclosures than RDR
An ultimate Australian parent is required to prepare consolidated financial statements. There is no exemption for non-reporting entities. As a result, CBC reporting entities will no longer be able to prepare stand-alone GPFS where a foreign parent prepares consolidated GPFS in accordance with International Financial Reporting Standards (IFRS®).
See also our companion Clarity publication Simplified Disclosures – Transition options and opportunities.
Note: This publication was originally published in May 2020 and updated in March 2022 to reflect amendments and developments since its original issue.
Alison is the leader of the National Accounting Technical Team in Deloitte’s Audit and Assurance division. She has over 19 years’ audit and accounting advisory experience in Australia, Hong Kong and South Africa, specialising in the resolution of complex accounting issues. Alison is currently a member of the Australian Accounting Standards Board and a member of the Fair Value and Business Combinations Project Advisory Panels. She is also a member of the Deloitte Global Expert Advisory Panel on Leases and the Property Council of Australia’s National Accounting Roundtable. Areas of specialist expertise include leasing and off-balance sheet structures, revenue recognition, impairment of assets, mergers and acquisitions and asset sale transactions.
Moana has over 21 years practical experience with Deloitte in a number of technical accounting related roles, including secondments to the Deloitte IFRS Global Office in London and Accounting Technical in New Zealand. In her current position Partner, Audit & Assurance – Accounting Technical, she provides specialist accounting advice to a variety of clients, specialising in impairment of assets and service concession arrangements, but also has extensive experience in all areas of A-IFRS. Moana was the primary author of AASB Research Report 9 – Perspectives on IAS 36: A Case for Standard Setting Activity (2019).