Are You Ready for Your First Year of Mandatory General Purpose Financial Reporting?

financial planning

Starting from 1 July 2021, the option for different for-profit entities to generate specific purpose financial statements (SPFS) has been eliminated, as previously discussed in our articles from February 2021 and September 2021, emphasizing the importance of financial planning.

Applicable Entities and Transition Period

Many entities are now required to incorporate financial planning and produce General purpose financial statements under the new Tier 2 Simplified disclosure standards regime (SDS).

  • unlisted public companies;
  • large proprietary companies (including grandfathered entities);
  • AFSL licensees;
  • small proprietary companies that have raised funding via crowdsourcing.

Some companies had adopted these changes early- however, many will need to adopt these changes for the first time from 1 July 2021 mandatorily.

Complex Considerations and Key Questions:

We have seen from advising the early adopters, as well as those that are currently preparing for the transition, the changes under the new requirements are far from simply disclosures and formats – there are complicated considerations that require adequate time and resources to produce financial statements to adequately meet these requirements.

Examples of the complexities and the questions that need to be addressed include the following:

  • Do I need to prepare a consolidation and produce consolidated financial statements?
  • How does a deed of a cross-guarantee impact my reporting requirements?
  • Do I need to account for and disclose deferred tax positions?
  • Will I need to update comparative disclosures?
  • How and to what extent should I be disclosing related party transactions?
  • What is required for essential management personnel disclosure?
  • What is the impact on disclosure requirements for AASB 15 Revenue from contracts with customers, AASB 16 Leases, and AASB 9 Financial instruments?
  • How do I explain the changes from SPFS to SDS in my report?

Chances are you will be answering “Yes” or “I need to understand this more” to many questions such as those above.

Importance of Financial Planning

The complexity of these reporting considerations underscores the importance of financial planning. It is crucial to allocate adequate time and resources to ensure compliance and accurate financial reporting.

Our experience has shown that implementing the new requirements is not to be taken lightly, and we strongly recommend careful attention is given to these reporting considerations as part of all companies currently preparing for their year-end accounting and tax reporting considerations. Effective financial planning can help entities anticipate challenges, identify necessary adjustments, and streamline their reporting processes.

Your team at Kreston Stanley Williamson is experienced in guiding you through these significant changes – please do get in touch with a member of our team should you require assistance.

Author – Kamal Thakkar

*Correct as of 19 April 2022

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.

Read Other Articles

Pin It on Pinterest