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.
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.
Find out more
We outline the current status on the progressive finalisation of the overhaul to the Australian financial reporting framework.
Current status of the overhaul to the Australian financial reporting framework.