Time for change: transitioning form special purpose financial statements to general purpose financial statements

By Ewan McIvor
Senior Audit Manager
5 August 2022

The removal of special purpose financial statements (SPFS) is now effective. Most for-profit entities will need to prepare their first general purpose financial statements (GPFS) for the year ended 30 June 2022 as the special purpose framework is no longer available to them. Making this change doesn’t need to be daunting, as long as you understand the options available to you.

Those who are required to transition will now need to consider whether they are a tier 1 or tier 2 reporter under AASB 1053: Application of Tiers of Australian Accounting Standards.

The assessment for tier 2 entities hinges on the definition of public accountability. An entity is deemed to have public accountability if:

  • its debt or equity instruments are traded in a public market, or it is in the process of issuing such instruments for trading in a public market (eg on a stock exchange); or
  • it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. (eg banks, creditunions, insurance companies, securities brokers/dealers, mutual funds and investment banks).

Any entity that is considered a tier 2 reporter will have the option to prepare GPFS: Simplified Disclosures (GPFS-SDS), which requires significantly less disclosures than that of full GPFS. Tier 1 reporters will need
to comply with the full suite of accounting standards and prepare full GPFS.

Below is a summary to help guide you through your transition from SPFS to GPFS or GPFS-SDS. This applies to both tier 1 reporters and tier 2 reporters.

Extent of compliance with accounting standards in old SPFS Options for transition
Full recognition and measurement including consolidation, only disclosure relief used. Update disclosures only, no relief available.
Partial compliance with recognition and measurement and consolidation

AASB 108 approach:

Comparative information

  • Full restatement of current and comparative periods i.e., apply all standards as if they have been adopted since the date of initial recognition of the balance.


  • Line by line disclosures of impacts

AASB 1 approach:

Deemed cost

Fair value at the transition date or previous revaluation can be adopted for:

  • property, plant & equipment
  • investment property
  • right of use assets and
  • certain intangibles.

Short-cut consolidation method

This permits:

  • equity reconciliation showing the changes to retained earnings and
  • the goodwill in the previously unconsolidated subsidiaries to be determined at the date
    of transition.

Reset of cost of investments

  • Permits unrecognised changes in the fair value of investments to be recognised.
No consolidation or equity accounting where subsidiaries or associates exist

ASB 108 approach:

Full retrospective adjustment including restatement of business and investment acquisitions as at
their initial acquisition date.

ASB 1 approach:

Same as above, but also:

Reset of foreign currency translation reserve

  • The cumulative translation differences for all foreign operations can be deemed to be zero at the date of transition.

Easier tracking of past acquisitions of foreign operations

  • Allows fair value adjustments and goodwill measured using the entity’s functional currency. The carrying amount (before depreciation,
    amortisation and impairment) do not change as a result of foreign exchange changes.

For any assistance with navigating the transition process, please reach out to your local PKF Audit representative.

To read more articles in the Winter 2022 edition of Clarity, click here