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Are special purpose financial statements still required in Australia?

The days are numbered for special purpose financial statements (SPFS) in Australia. We are now moving to an SPFS-free framework, which is the result of extensive research, evidence-gathering and stakeholder engagement by the Australian Accounting Standards Board (AASB). However, this change does not impact everyone; entities that don’t need to comply with Australian Accounting Standards (AAS) may still prepare SPFS.

At the March meeting of the AASB, the board approved the proposal to remove the ability of certain for-profit entities to prepare SPFS, with effect from 1 July 2021.  Large proprietary companies, unlisted public companies and others with a statutory obligation to prepare financials in accordance with AAS will be among those affected.

For-profit entities’ ability to prepare SPFS will be removed first, followed by that of private-sector NFPs, and finally the public sector. The AASB has acknowledged the challenges involved for NFPs in removing their ability to prepare SPFS.

As an interim measure, the AASB has introduced AASB 2019-4, which requires NFPs preparing SPFS to make certain compliance disclosures with the recognition and measurement requirements of AAS. Disclosures relating to consolidation and equity accounting will also be required.

These requirements are effective for accounting periods ending on, or after 30 June 2020, and only apply to NFPs required to apply AASB 1054 Australian Additional Disclosures, such as those NFPs required to lodge financials with the ACNC or ASIC.

The AASB hopes to issue an exposure draft on its NFP financial reporting framework proposals later this year, with a finalised standard following in the second half of 2021. It is expected that any changes to the NFP reporting framework will come into effect after 2022.

To view the CPA Australia article in full, click here

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