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In March 2020, the Australian Accounting Standards Board (AASB) ruled that from 30 June 2022, certain for-profit private sector entities that previously prepared SPFS to lodge with the Australian Securities and Investment Commission (ASIC) would no longer be able to do so.
Instead, it outlined that accounts would need to be prepared using the new Simplified Disclosures for For-Profit and Not-for-Profit Entities (known as AASB 1060) – which replaces the current Tier 2 Reduced Disclosure Regime (RDR).
These changes to reporting may appear daunting, particularly as the SPFS standards have been part of the Australian accounting world for a long time. But as with navigating any major change, a little preparation can go a long way.
Kerry Agiasotis, APAC president of leading business management software provider The Access Group answers some questions about SPFS.
What exactly are Special Purpose Financial Statements (SPFS)?
Special Purpose Financial Statements are prepared for a variety of reasons including, to satisfy legislative requirements or the entity’s constitution, compliance with contracts or agreement, or satisfying the internal information needs of the entity.
Why were these changes instituted?
The Australian Accounting Standards Board (AASB) wanted to bring the current Tier 2 Reduced Disclosure Regime (RDR) in line with international practices, specifically the International Financial Reporting Standards (IFRS) for small to medium enterprises (SMEs), while ensuring certain entities preparing SPFS would also fall under the new Simplified Disclosures for For-Profit and Not-for-Profit Entities (known as AASB 1060).
The new name is Simplified Disclosures for For-Profit and Not-for-Profit Entities – how has it been simplified?
There has been a reduction in disclosure compared to the previous Reduced Disclosure Regime (RDR).
How different is the new process to the Tier 2 Reduced Disclosure Regime (RDR)?
Some disclosures have been removed, new have been added for IFRS for SMEs and others have been updated based on feedback provided to the AASB.
Many accountants are already under time constraints and now it’s very likely that extra preparation time will be required to create a set of accounts as well as an increased burden on accountants when preparing the figures for the sets of accounts.
Extra training may also be required for staff, putting the pressure on businesses from a time and financial investment perspective, to help them become familiar with the concepts introduced as part of the Simplified Disclosures.
How can accountants prepare to ensure they can work with the new changes?
Having a powerful reporting application like Final Accounts will help with these mandatory disclosure requirements. In addition, there is the potential to leverage the software capability to generate additional fees by expanding your services offerings.
Are there certain things of which they may now need to be more aware?
If they were preparing RDR previously, there is less to do, if they didn’t they will need to be fully aware of the new reporting requirements under the standard and perform a review exercise on clients to see if they fall within the remit of AASB 1060.
How will these changes affect the way in which financial reports are done in the future?
Accountants need to follow the new standard if it applies to the entity, they are preparing accounts for.