SPFS Removal – Ready set go!

By Hayley Keagan
Technical Director
7 May 2021
  • Financial reporting

As the removal of non-reporting entities and Special Purpose Financial Statements (looms closer, have you considered yet if you are GPFS ready? Here is how to find out.

  • Remaining timeline

The removal of the reporting-entity concept occurs on 1 July 2021. If you are a June reporter you

need to prepare a General Purpose Financial Statements (GPFS) for your 30 June 2022 year (31 December 2022 for the December reporters).

Mandatory for:

- Financial reports for year ended 30 June 2022

- Financial reports for year ended 31 December 2022

The AASB is encouraging entities to transition earlier by offering disclosure relief for those that do.

  • Overview of practices (those early adopting and those not)

Most entities are waiting until the mandatory date to transition to their new GPFS. Reasons for this

vary but these reasons are common:

“why make changes earlier than necessary?”

“the impact will be minimal for my business anyway”

“I want to protect the privacy of the business for as long as possible”

We want to let all SPFS preparers to be aware of the opportunities and implications of choosing the

right transition date.

 

Transitional relief is available but only if you make the change early.

Waiting until 1 July 2021 means missing out on the relief. It is a good idea to assess if the relief is right for your business before it’s too late.

  • Navigating the transitional relief

The transitional relief offered is complex. This brief overview is designed to give you an initial

indication to help you understand what transition option is best for your business.

Type of special purpose report you currently prepare

Full compliance with recognition and measurement of accounting standards including consolidations

Full compliance with recognition and measurement of accounting standards but does not consolidate

Some or no compliance with measurement of accounting standards

Explanation of financial report type

The way in which you report the balances are consistent with accounting standards.

You consolidate all businesses in that are controlled by the head entity.

The way in which you report the balances are consistent with accounting standards.

You prepare only a stand-alone financial report for the single entity.

The way in which you report your balances do not necessarily follow accounting standards. Examples would be using tax basis for accounting or choosing not to apply lease accounting.

Is relief available?

No

Yes

Yes

Extent of relief

Relief is not available to those who have disclosure implications only.

Relief can assist with the burden of having to prepare consolidations at multiple balance dates.

Relief can assist with the burden of having to redo accounting entries at multiple balance dates.

 

  • How the relief works

Relief is only available for businesses changing over to GPFS prior to the mandatory date. You will need to act this year if you have not done so already.

The relief allows businesses to avoid restating comparative information and instead including disclosures regarding what changes have occurred to your financial report.

For example, an entity who applies the relief would show the following balances:

FINANCIAL REPORT PREPARED UNDER GPFS-SDS FOR THE YEAR ENDED 30 JUNE 2021

 

Balance

Comparative

Balance sheet

30 June 2021

1 July 2020

Profit & loss

30 June 2021

30 June 2020*

* Transactions per old SPFS. An additional note disclosure is required to explain the differences between balance sheet and P&L.

The comparative balance sheet date of 1 July 2019 means disclosures such as movement reconciliations will show only 1 period.

The statement of cash flows and statement of changes in equity will need to align with the profit

and loss comparative dates. Meaning that numbers will not easily be reconciled between the

current and comparative balances.

In contrast, an entity that does not apply the relief or who waits until the mandatory transition date

will show the following balances:

FINANCIAL REPORT PREPARED UNDER GPFS-SDS FOR THE YEAR ENDED 30 JUNE 2022

 

Balance

Comparative

Additional*

Balance sheet

30 June 2022

30 June 2021

1 July 2020

Profit & loss

30 June 2022

30 June 2021

-

* a third Balance Sheet showing opening balances will need to be included as per AASB 108.

The relief can provide some cost savings if preparing the financial information for three balance dates will be cumbersome. Although it will not be the answer to everyone’s concerns during this time of change.

Alert for not-for-profits and other entities currently using RDR!

If you currently prepare GPFS-RDR you will also be impacted by the transition from RDR to SDS with the same mandatory dates. These changes impact the type of information you need to disclose. It is best to be prepared in case any additional financial information needs to be collected by your business.

Acronym explanation

We love to apply our acronyms in accounting. It allows us to relay more information in a condensed form. However, we understand not everyone speaks this language so here is a list of acronyms you may come across on this topic:

AAS

Australian Accounting Standards

SAC 1

Statement of Accounting Concept 1,

Definition of the Reporting Entity

AASB

Australian Accounting Standards Board

ASIC

Australian Securities & Investment Commission

SPFS

Special Purpose Financial Statements

GPFS

General Purpose Financial Statements

SDS

Simplified Disclosure Standard

NFP

Not-for-profit

RDR

Reduced Disclosure Regime