The Australian Accounting Standards Board (AASB) issued the following standards in March 2020:
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AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities and;
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AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities.
These standards are effective for reporting periods beginning on or after 1 July 2021 (i.e. 30 June 2022 year ends).
AASB 1060 introduces a new Tier 2 of disclosures (SDS) for financial reporting and will replace the current Reduced Disclosure Requirements (RDR) framework. This means that entities currently applying the RDR framework or for-profit entities preparing special purpose financial statements (which AASB 2020-2 removes[1]) will be required to apply the SDS framework at a minimum (unless they choose to apply Full IFRS or Tier 1. Unlike the RDR framework which uses greyed out paragraphs in particular standards to illustrate the change in disclosures from T1 to T2, the SDS framework has all the disclosures required located in the one standard. Whilst there are some new disclosures in the SDS framework, overall there is a significant reduction in disclosures when compared to the RDR framework. On the flip side, those entities which are no longer permitted to prepare special purpose financial statements and will be required to step up to the SDS framework will see a significant increase in disclosures (particularly in relation to related party transactions).
SDS requires the application of all recognition and measurement requirements of full IFRS T1, including consolidation of subsidiaries and equity accounting of associates and joint ventures. Where AASB 1060 is applied on the mandatory application date (30 June 2022), there is no transitional relief and the restatement of comparative information and disclosures is required. Where AASB 1060 is applied early (say for 30 June 2021 year ends) then:
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The restatement of comparative information is not required (i.e. where consolidation of subsidiaries occurs for the first time, then consolidation will commence at the start of the current year and the comparative year will remain unchanged (subsidiary carried at cost)). Where comparative periods are not restated, then a reconciliation of equity from the latest special purpose financial statements to the adjusted opening balances in the notes is required.
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Comparatives for those note disclosures that were not previously required for special purpose financial statements are not required.
For more information on the significant disclosure differences between SDS, RDR and special purpose frameworks, download the publication here.