Navigating the General Purpose Financial Statements transition
The road to a successful General Purpose Financial Statements (GPFS) transition is neither straight nor uncluttered. Successful navigation requires you to make deliberate, informed decisions along the way. Failure to do so could compromise your relationship with the regulator and other stakeholders, which could in turn erode shareholder value.
Finding the right timing might be your first fork in the road. Mapping out an early transition presents a unique opportunity for your organisation to assess and address your compliance to date, with the recognition and measurement requirements (including consolidation and equity accounting, when relevant) in applicable International Financial Reporting Standards (IFRS) as well as Australian Accounting Standards (AAS).
Five steps to successful GPFS transition
Following these five simple steps can help to ensure you avoid unnecessary speed bumps in your GPFS transition journey. Our team of IFRS specialists across Australia can help you take the wheel, and guide your entity to its destination.
Step 1 – Assess whether you need to make the switch
If you currently complete Special Purpose Financial Statements (SPFS), you might need to consider moving to GPFS. For years ending 30 June 2022 onwards, we would expect that the following types of entities will need to upgrade their SPFS to GPFS, using the new Tier 2 simplified disclosures:
- All entities lodging financial statements with ASIC under 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.
Still not sure if you’ll need to switch? We can help.
ASSESS MY SITUATION
Step 2 – Complete a GPFS Health Check
A BDO GPFS Health Check involves an initial assessment of your entity’s compliance, to identify the gaps you’ll be required to address. On completion of an IFRS Health Check, we’ll communicate our findings of any areas of non-compliance and provide recommendations on what you need to undertake to achieve material compliance with all applicable recognition and measurement requirements (including consolidation and equity accounting, when relevant) on your transition to Tier 2 GPFS - Simplified Disclosures.
Based on our findings, we’ll also recommend an appropriate transition approach to Tier 2 under either:
- AASB 1 First-time Adoption of Australian Accounting Standards, or
- AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.
GET A GPFS HEALTH CHECK
Step 3 – Analyse your skills and systems gap
Once you’ve received the report and know the path you’ll take, it’s a good time to assess the resources you have available to action your plan. Does your team have the required knowledge in Australian Accounting Standards, or do you need to invest in some training or expertise to upskill them. Question whether your systems are able to efficiently and effectively support your reporting needs.
BDO has a range of ways we can help your team to develop the skills you need for GPFS transition:
- WEBINARS | Join our monthly, complimentary IFRS webinars focused on the latest developments in financial reporting. You can sign up for one of these popular webinars, or the whole series.
- WORKSHOPS | Our new ‘Transition to GPFS’ Virtual Workshops are specially designed to upskill your team in readiness for GPFS reporting. Starting on 20 April 2021, this online series delivers the practical knowledge you need on a different topic each week.
- E-LEARNING HUB | Online materials that demonstrate how IFRS and AASB principles apply in practice, including summaries of recent agenda decisions of the IFRS Interpretations Committee (IFRIC).
Upskill my team
Step 4 – Decide which transitional approach is right for you
It’s time to decide on a transition approach to full recognition and measurement (including consolidation and equity accounting, if relevant) under IFRS and AAS.
You should consider the best timing for your organisation to transition. While the mandatory compliance date is 30 June 2022, transitioning early has benefits that you should weigh up – noting that 30 June 2021 is your last chance to benefit from transitional relief measures. Relief could include new disclosures not needing 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.
Step 5 – Prepare your GPFS disclosure
Once you’ve planned your implementation and timing, all that’s left to do is prepare your financial statements. However, this task should not be underestimated. Entities transitioning to GPFS that have public accountability (e.g. certain AFS licensees) must prepare Tier 1 disclosures, which means including all material disclosures from Australian Accounting Standards, and this could be a time-consuming and costly exercise.
We expect that most entities transitioning to GPFS will not have public accountability and therefore prepare Tier 2 GPFS, which comprises the Simplified Disclosures contained in the new standard, AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities. Simplified Disclosures replace the Reduced Disclosures (RDR), which means new disclosure templates will be required if you have previously used RDR for Tier 2 GPFS of other group entities.
Disclosures Management Tool
The Disclosures Management Tool was designed to give you the peace of mind that you’ve adequately identified, evidenced and actioned all the changes that were required for your organisation.
By answering a series of tailored questions, this online tool will determine which disclosures are appropriate for you and identify any remaining gaps or actions you still need to take to achieve compliance.
It also provides you with a central place to maintain an audit trail of what disclosures you are making, and your rationale. You can upload the supporting working papers and documentation that underpin your decisions, so your auditor can easily access and assess your decision making.
FIND OUT MORE ABOUT THE DISCLOSURES MANAGEMENT TOOL
GPFS training materials and publications:
At BDO, we have a team of financial reporting experts across Australia who are ready to steer your organisation to GPFS compliance. Why not start with a BDO GPFS Health Check to better understand your current situation, and the gaps you’ll need to address. Contact us to get started today.