By Hayley Keagan, Hayley KeaganTechnical Director
15 February 2022
A new standard has been released to help small businesses prepare more simplified financial reports. The new standard AASB 1060: General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities has been dubbed the “Simplified Disclosure Standard” or SDS for short. It provides an opportunity for eligible businesses to prepare General Purpose Financial Statements (“GPFS”) but in a simplified manner.
Who needs to be aware of it
The Simplified Disclosure Standard will be available to any business who does not have public accountability, not for profit entities and public sector entities other than governments. It is particularly beneficial for those businesses that need to comply with GPFS, but don’t want the burden of preparing significant disclosures.
Summary of changes
The new standard is presented in a one-stop, easy to use format, with all disclosure requirements in the one handy standard. The standard is split into sections using headings, for each intended area of your simplified financial statements. Therefore, you can easily disregard those areas not applicable and quickly find the information that’s relevant.
If you currently prepare Special Purpose Financial Statements (“SPFS”) then you may find that there are additional disclosure requirements of the new Simplified Disclosure Standard, however if you currently prepare Reduced Disclosure Financial Statements (“RDR”) then you may find some relief by transitioning to the new Simplified Disclosure Standard. Unfortunately, many for-profit businesses will no longer be able to prepare SPFS so the new standard, although somewhat more burdensome, is a great alternative to full GPFS.
Some of the changes you can expect:
Currently preparing SPFS
Currently preparing RDR
This list is just a sample of some of the changes that may affect your business, it is in no way a complete list. Particularly, due to the variability in SPFS currently being prepared each business will need to assess its impact individually.
When is the best time to change
Every business is different and should consider their own reporting requirements before deciding to change. However, many businesses may soon be forced to make that change, as SPFS and RDR frameworks start to come to an end.
When making a decision about when to make the move, it is best to consider some of the points below:
- If you need to adjust your accounting policies, it will be advantageous to prepare early to take advantage of limited time relief for your comparative disclosures;
- If you need to include additional new disclosure items, you may want to consider if you have the data available to compile the disclosure details or if additional data may need to be collected;
- If a transition to the Simplified Disclosure Standard would provide financial report users with better information and the information is available, then you may wish to transition earlier rather than later;
- If your financial reporting software has the capability to prepare a financial report using the Simplified Disclosure Standard, and if you have the resources available. Most popular packages have already released their updates and their illustrative financial statements now being made available on the internet.
To work out the impact on your financial report, or to find out your best approach to transitioning to the new Simplified Disclosure Standard, get in contact with your local PKF audit team today.