We have finally reached the 30 June 2022 reporting period when certain For-Profit private sector entities are no longer able to prepare special purpose financial statements.
Given the number of queries which continue to be received on this topic on an almost daily basis, we have summarised the considerations for entities currently preparing special purpose financial statements for years ending on or after 30 June 2022 as well as some common misconceptions that seem to exist.
1. False: All for-profit private sector entities have to prepare general purpose financial statements
All for-profit private sector entities should assess whether they meet either of the two criteria for preparing general purpose financial statements as summarised in the diagram below.
2. False: These changes only apply to companies
These changes apply to all for-profit private sector entities, including the following:
- Joint ventures
- Incorporated entities
3. False: We only need to consider the Corporations Act 2001 when considering the legislation criteria
The Corporations Act 2001 is the most common legislation which is discussed and will capture a number of companies who are required to prepare financial statements in accordance with Chapter 2M or Chapter 7, however there are other legislative requirements to prepare financial statements and entities should ensure that all relevant requirements are considered.
The AASB issued Research Report No. 10 Legislative and Regulatory Financial Reporting Requirements which provides indications of other legislation which contains financial reporting requirements.
4. False: We only need to consider the entity’s constitution when considering the ‘documents’ criteria
The criteria which considers the requirements of documents includes all documents with which the entity has to comply, these can include:
- Trust deeds
- Bank loan agreements
- Shareholder agreements
- Sale/Purchase agreements
- Partnership agreements
- Joint venture agreements
5. Depends: All changes to constituting and other documents after 1 July 2021 will cause general purpose financial statements to be prepared
If the document is changed after 1 July 2021 and the sentence requiring ‘preparation of financial statements in accordance with Australian Accounting Standards’:
- IS NOT REMOVED from the document then general purpose financial statements will have to be prepared.
- IS REMOVED from the document then special purpose financial statements can be prepared.
Other Caseware reference documents on this topic:
- AASB 2022-4 Amendments to Australian Accounting Standards – Disclosures in Special Purpose Financial Statements of Certain For-Profit Private Sector Entities
- Which tier of general purpose financial statements do I have to prepare?
- Simplified disclosures
- RDR to SDS comparison document:
- Do the Special Purpose financial reporting changes affect Not-for-profit entities?
- 2021 Caseware Customer Conference session SDS – what now?
- Webinar – Removal of Special Purpose Financial Statements
If you have any queries on this topic contact our customer support team or reach out directly to Carmen Ridley via email@example.com