For years ending 30 June 2022 onwards, the following types of for-profit private sector entities will no longer be permitted to prepare special purpose financial statements:
- Entities required by legislation to prepare financial statements that comply with Australian Accounting Standards or accounting standards, and
- Entities required by their constitutions or other documents to prepare financial statements that comply with Australian Accounting Standards (only if the relevant document was created or amended on or after 1 July 2021).
Which types of entities will be affected?
We would expect that the following types of entities will need to upgrade their special purpose financial statements to Simplified Disclosures, which replaces Reduced Disclosures and is the new Tier 2 general purpose reporting framework:
- Chapter 2M of the Corporations Act 2001, including grandfathered large proprietary companies, small foreign controlled companies that do not apply the relief in Legislative Instrument 2017/204, small proprietary companies that have accessed crowd-sourced funding, and small proprietary companies preparing financial statements according to a shareholder or ASIC direction that requires Australian Accounting Standards
- AFS licensees reporting under Chapter 7 of the Corporations Act 2001, and
- Registered foreign companies where financial statements are not required in their home jurisdiction.
Incentives to adopt Simplified Disclosures for 30 June 2021
While the new requirements are only mandatory for years ending 30 June 2022, there are significant incentives for affected entities to move to Simplified Disclosures from 30 June 2021 because there is relief available so that new disclosures do not need to be included for the comparative period, and in some cases, comparatives will not need to be restated and error corrections will not need to be distinguished from transitional adjustments. Please contact BDO’s IFRS Advisory team for assistance with your transition options.
Simplified Disclosures training materials and publications: