Changes to Australian Accounting Standards will require close attention from small and medium businesses and their advisers. AASB 2020-2 and AASB 1060 are the relevant standards.
Special purpose financial reports for private businesses are set to end in the 2022 financial year. As the reforms will impact many organisations, SMEs should be having discussions with their advisers immediately about how it will affect their enterprise.
The changes do not apply to all private companies. Companies who will be affected include:
- Companies who lodge audited reports with ASIC from 30th June 22 , and
- Financial reports that have to be prepared in accord with Australian Accounting Standards or IFRS
The new framework for financial reporting is designed to provide more information and detail in reports.
In this new framework, private companies will have additional requirements in relation to disclosures and the application of all measurement and recognition accounting policies in accordance with Australian Accounting Standards. For instance, disclosure of related party transactions including remuneration levels, financial instruments and tax effect accounting are some but not the only elements to be affected by the new requirements.
Private company constitutions, trust deeds and self-managed superannuation funds should all be reviewed. These documents may stipulate the requirement of the entity to follow Accounting Standards. Also, partnership or joint venture arrangement agreements, customer and supplier contracts and loan documents could be affected.
The removal of special purpose financial reports means more financial information is required to be disclosed. That should assist those organisations wanting to transact with other businesses, as there should be more relevance in the reporting.
However, managing the new disclosure and application of accounting standards under this framework will require early advice, particularly in the transition period. Knowing what to disclose and the impact on comparative figures for reporting will be critical.
Like most changes in reporting requirements, getting on top of this early will help to overcome later headaches.
Hayes Knight can assist with the implementation of the new requirements. Speak with our Audit Director – Vincent Poon.
You can also contact us on 02 9221 6666 or leave us a message.
