Clarity Mag

Time to declutter your accounting policies

As part of endeavours by the AASB and IASB to improve the usefulness of financial reporting and move towards more principle-based disclosure, changes have been made to AASB 101: Presentation of Financial Statements. The amendments will require preparers to present only material accounting policies which is a change from the current rules that require disclosure of all significant accounting policies. Therefore, in upcoming annual reports, we expect to see a significant reduction in the amount of accounting policy disclosures.

What do preparers need to do

Management teams will need to plan ahead and consider the impact of this change on their financial reporting processes. As mentioned, for most entities this will reduce the volume of accounting policy disclosure, but there will need to be significant judgement applied. Therefore, it would be useful to have a documented trail of this decision-making process to show to those charged with governance, auditors and ASIC (if ever required).

In order to assess which accounting policies are “material” to financial reporting, preparers may consider the following factors:

  • Whether there have been any changes to accounting policies during the period
  • Whether the entity makes a permitted choice of accounting policy under accounting standards
  • Whether policies have been developed in the absence of an accounting standard that specifically applies
  • Whether the accounting policy relates to an area or areas of significant judgement
  • Whether the accounting is complex and would not be otherwise understood for material transactions, other events or conditions.

The AASB has provided a useful flow diagram in the amendments to assist with the decision-making process when assessing immaterial versus material accounting policies.

The AASB has also provided some useful examples in the amendments. Although being specifically related to 1) Accounting for Revenue and 2) Property, Plant Equipment, they provide insight on the application of this new approach.

Preparers should also consider maintaining a schedule of all accounting policies (outside of those related to financial statements), which they may use to select and include among their material policies. It should be emphasised that conclusion on an accounting policy being material in one reporting period does not necessarily indicate that it will continue to be material in future reporting periods.

The updated accounting standard is effective for accounting periods beginning on or after 1 January 2023 and can be adopted earlier.


We expect that these amendments on accounting policy disclosures will be very helpful to preparers of financial statements in deciding which accounting policies to disclose in their financial statements. These changes will further emphasise the need for companies to only include information specific to them, and therefore moving away from previous potentially boilerplate disclosures.

Please reach out to your local PKF Audit and Assurance team for further insights or guidance.

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