Removal of special purpose financial statements has been saved
Removal of special purpose financial statements
Clarity in financial reporting
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 key impacts include:
- 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®).
Download the publication to learn more.
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.