Many business owners know that the special purpose financial statements (SPFS) are slowly being phased out. This financial report has long been used by “non-reporting entities” who need to present their data to a limited group of users for a specific purpose.
Soon, Australia will move forward with an SPFS-free framework after an extensive study by the Australian Accounting Standards Board (AASB). This article will tell you what you need to know about the subject so you can better prepare for new regulations ahead.
Will SPFS Be Gone for Good?
The SPFS will not completely disappear. Instead, it will be separated. SPFS can apply to companies and businesses that do not need to comply with the Australian Accounting Standards (AAS).
Here is a little background to help you understand what happened and what will happen soon:
- International Financial Reporting Standards (IFRS) was the basis of the AAS, and it was reestablished as the AAS in 2005. This is where SPFSs began.
- Fast forward to a few years later: the IFRS then introduced the General Purpose Financial Statements (GPFS), which enables reduced disclosure of financial statements while still recognising the mandatories and requirements set by the AAS.
- The Australian Accounting Standards Board (AASB) decided to create other frameworks—one based on the IFRS requirements, and the other as a simplified disclosure framework. As you can see, the SPFS is completely removed from the frameworks by this time.
- Both the for-profit and not-for-profit private sectors will be affected by the changes later on.
The Effects of the New Direction
Here are the recent happenings and the news:
- In March, the AASB decided to no longer require large for-profit companies—proprietary companies, unlisted public companies, and the like—to use SPFS starting 1 July 2021.
- CPA Australia, Chartered Accountants Australia, and New Zealand (CAANZ) created a joint submission, requesting the AASB to give them two years before fully transitioning to the new change. With this, other companies followed suit.
- Because of this, the AASB decided to move the implementation date to one year to financial years after 1 July 2021. At the same time, they also announced perks for those who would adopt the changes the soonest.
- The case is different for for-profit trusts or entities that prepare AAS-based financial statements. If their financial statements are a requirement of their constituting document, they will be unaffected. Take note that this exemption is only applicable to documents created or amended before 1 July 2021. In their case, the SPFS would be removed first. The private sector NFP and the public sector will follow soon after.
What Happens to Those That Already Prepared Their SPFS
Companies that already prepared their SPFS for the year up before 30 June 2021 are required to make disclosures about their compliance. This is alongside their recognition and measurement requirements. The same disclosure and requirements are also required for NFP entities.
There are still many things to learn about this change, and it is still currently being observed. Make sure to determine whether any of these new regulations apply to your business. Better yet, talk to your accountants so they can explain the changes. Through their help, you can understand how these changes affect your company.
Should you need accountants along the Sunshine Coast, QLD, SMB Accounting is here to assist you. SMB Accounting is a leading accounting firm in Australia providing outstanding service to our clients—both businesses and individuals alike. We offer a range of accounting services, from taxation to Quickbooks consulting. Contact us at 1 300 854 159.