KPMG's guide Transition to Simplified Disclosures will assist entities preparing Tier 2 Simplified Disclosures (SD) financial statements for the first time as at 30 June 2022.

In summary...

The reporting entity concept, which is unique to Australia, is ending after a 30-year run. It will be replaced by a framework where there is no longer any subjectivity around which category of reporting an entity falls into.

The Australian Accounting Standards Board (AASB) introduced a new Australian private sector financial reporting framework. This new framework effectively brings an end to special purpose financial statements (SPFS) for a number of entities.

The new framework for for-profit private sector financial reporting consists of two Tiers of financial reporting for preparing general purpose financial statements (GPFS):

  • Tier 1: Australian Accounting Standards (in full)
  • Tier 2: Australian Accounting Standards – Simplified Disclosures (SD).

Tier 2 comprises the recognition and measurement requirements of Tier 1 (including consolidation and the equity method of accounting, where applicable) but substantially reduced disclosure requirements. Tier 2 disclosure requirements are set out in AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.

The new framework is effective for financial years beginning on or after 1 July 2021 – so financial years ending 30 June 2022 will be the first to implement.

Transition to Simplified Disclosures guide released

To assist with the transition we have developed a practical guide Transition to Simplified Disclosures (PDF 1.74MB) for entities preparing Tier 2 SD financial statements for the first time as at 30 June 2022.

It provides guidance for the following:

  • How to practically account for where an entity transitions from SPFS, GPFS-Tier 2 or GPFS-Tier 1, in the prior financial year, to GPFS-Tier 2 SD for the current year (30 June 2022).
  • When a transitioning entity is required to apply AASB 1 First-time Adoption of Australian Accounting Standards. The guide includes a number of illustrative examples on potential adjustments that would be required if an entity is not already complying with all recognition and measurement requirements in Australian Accounting Standards.
  • Example basis of preparation notes for the first year of adopting GPFS-Tier 2 SD.
  • Example AASB 1 transition disclosures.

We hope that the guide will assist you in working through your transition to Tier 2 SD financial statements.

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

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