For those entities preparing special purpose financial statements AASB 2022-4 proposes additional disclosures to enable users to better understand the basis of preparation. These measures aim to improve transparency and comparability. The amendments apply for 30 June 2022 financial years.

In summary...

The Australian Accounting Standards Board (AASB) has issued AASB 2022-4 Amendments to Australian Accounting Standards – Disclosures in Special Purpose Financial Statements of Certain For-profit Private Sector Entities (AASB 2022-4).

AASB 2022-4 amends AASB 1054 Australian Additional Disclosures. It will add requirements for certain for-profit private sector entities that are preparing special purpose financial statements (SPFS) to disclose information about those financial statements. This will include information that enables users of the financial statements to understand:

  • the basis on which the decision to prepare SPFS was made
  • where the entity is a parent, whether or not its subsidiaries have been consolidated and its investments in associates or joint ventures have been equity accounted
  • the material accounting policies applied in the financial statements, changes in those policies and whether or not the policies comply with all the recognition and measurement (R&M) requirements in Australian Accounting Standards (AAS).

AASB 2022-4 is consistent with the guidance published for not-for-profits private sector entities in 2019. 

The new disclosures do not require for-profit entities to change their existing accounting policies. They are instead based on an entity’s existing financial reporting policies and practices.

While the standard was only issued in the late June 2022 it applies for annual periods ending on or after 30 June 2022. This is a very short timeframe.

The AASB believes that the amendments are needed to provide more transparency to the users of SPFS. Further, it should increase comparability with other SPFS and even general purpose financial statements (GPFS) to the extent of compliance with AAS.

At a high level the amendments cover disclosure of information about the compliance with R&M requirements in AAS. More specifically, it is proposed that a for-profit private sector entity must disclose information in relation to each of the following:

Disclosure requirements for for-profits – infographic

In disclosing the above information, entities are not expected to provide quantitative information, or reconciliations, where accounting policies do not comply with all the R&M requirements in AAS.

Further details on each of the above, including illustrative disclosures can be found in the PDF version of the Reporting Update.

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