Removal of Special Purpose Financial Statements – Does it impact you?

The AASB has issued ED 297 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities.  ED 297, if approved, will remove the ability of for-profit large proprietary, unlisted public (other than companies limited by guarantee) and small foreign-controlled companies to lodge special purpose financial statements (SPFS) with ASIC (i.e. directors can no longer self-assess that they are a non-reporting entity).  Current estimates from the AASB predict 7,295 companies will be impacted by these changes.
 
Those companies no longer able to prepare SPFSs will apply either full IFRS (Tier 1) or the proposed new Simplified Disclosure Standard (Tier 2) scheduled to replace the Reduced Disclosure Requirements (RDR) framework at the same time as these proposals commence (discussed in our previous post on ED 295 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities).
 
Those entities currently preparing SPFSs and not consolidating subsidiaries or equity accounting associates and joint ventures are likely to experience the biggest impact from these changes along with all special purpose entities facing an increased level of disclosure in their financial statements.
 
The changes are not just restricted to entities who lodge with ASIC. The AASB has highlighted the following for-profit private sector entities which may be impacted upon:
  • co-operative and mutuals and others who are required by legislation to prepare financial statements that comply with either Australian Accounting Standards (AAS) or accounting standards (AS);
  • trusts, partnerships and joint arrangements whose constituting document or another document requires the preparation of financial statements that comply with AAS if the relevant document was created or amended on or after 1 July 2020; and
  • others (both private and public sector) that elect to prepare general purpose financial statements (GPFS) and elect to apply the Conceptual Framework for Financial Reporting.
The good news is, that according to the AASB, the following entities can still continue to prepare SPFSs post these changes:
  • small proprietary companies;
  • trusts, partnerships and joint arrangements unless their constituting documents are created or amended after 1 July 2020;
  • not-for-profit entities such as charities, companies limited by guarantee, incorporated associations and public sector entities as their financial reporting framework will be considered via separate targeted consultations; and
  • for-profit public sector entities (unless they elect otherwise).
The current proposals are scheduled to commence for reporting periods beginning on or after 1 July 2020 with transitional relief from restating and presenting comparative information in the year of transition.

Comments on both ED 297 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities, and ED 295 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for Profit Tier 2 Entities are due to the AASB by 15 November 2019.
 
To review ED 297 in detail please click this link:
https://www.aasb.gov.au/admin/file/content105/c9/ACCED297_08-19.pdf