Proposals to require entities lodging with ASIC and ACNC to disclose compliance with recognition and measurement requirements of Australian Accounting Standards


At present, entities lodging financial statements with the Australian Securities and Investments Commission (ASIC) and the Australian Charities and Not-for-profits Commission (ACNC) are required, as a minimum where general purpose financial statements are not prepared, to comply with all the requirements (recognition, measurement and disclosures) in the following Australian Accounting Standards:

  • AASB 101 Presentation of Financial Statements
  • AASB 107 Statement of Cash Flows
  • AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors
  • AASB 1054 Australian Additional Disclosures.

However, despite ASIC’s Regulatory Guide 85 Reporting requirements for non-reporting entities, there has historically been diversity in practice regarding the extent of compliance with the recognition and measurement requirements of all the other (i.e. remaining) standards for these types of entities.

The Australian Accounting Standards Board (AASB), as an interim measure until its broader project for removing special purpose financial statements is completed, has therefore decided to issue an Exposure Draft to require disclosure by these entities as to their extent of compliance with the recognition and measurement requirements of Australian Accounting Standards.

This decision was made at the AASB’s April 2019 meeting, and it was outlined in its Action Alert.

What is being proposed?

Both for-profit and not-for-profit (NFP) entities that prepare special purpose financial statements and fall within the scope of AASB 1054 Australian Additional Disclosures (for example, entities lodging with ASIC or the ACNC) will need to disclose:

  • Whether they have subsidiaries, and if so, whether they have prepared consolidated financial statements (and if not consolidated, why not)
  • If they have investments in associates and joint ventures, whether they have accounted for these under AASB 128 Investments in Associates and Joint Ventures (i.e. in most cases by equity accounting)
  • Whether the entity has or has not complied with all the recognition and measurement requirements of Australian Accounting Standards, and
  • If the entity did not comply with all the recognition and measurement requirements, enough information so that users can clearly understand the accounting policies.

Does this mean that entities will need to comply with all recognition and measurement requirements?

No. The AASB has indicated that this Exposure Draft will NOT require entities to change their accounting policies. However, they will need to clearly state whether or not their accounting policies comply with all the recognition and measurement requirements.

When are these proposals likely to be effective?

An Exposure Draft is expected to be issued by the AASB in June 2019 with a comment period of 45 days, with the intention of issuing a final standard before December 2019. However, the AASB notes that given clear stakeholder expectations of trust and transparency from directors, early voluntary disclosure for 30 June 2019 financial statements is encouraged.

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