Compiled AASB Standard |
This compiled Standard applies to annual periods beginning on or after 1 January 2024 but before 1 January 2025. Earlier application is permitted for annual periods ending before 1 January 2024. It incorporates relevant amendments made up to and including 14 September 2023.
Prepared on 18 December 2023 by the staff of the Australian Accounting Standards Board.
Compilation date: 31 December 2023
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Contents
ACCOUNTING STANDARD
AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities
from paragraph
OBJECTIVE 1
SCOPE 3
TIER 2 DISCLOSURES
Financial Statement Presentation 8
Statement of Financial Position 34
Statement of Profit or Loss and Other Comprehensive Income 48
Statement of Changes in Equity and Statement of Income and Retained Earnings 59
Statement of Cash Flows 64
Notes to the Financial Statements 90
Consolidated and Separate Financial Statements 104
Accounting Policies, Estimates and Errors 106
Basic Financial Instruments 111
Other Financial Instrument Issues – Hedging Disclosures 120
Inventories 123
Investments in Associates 125
Investments in Joint Ventures 129
Investment Property at Fair Value 132
Property, Plant and Equipment and Investment Property at Cost 134
Intangible Assets other than Goodwill 137
Business Combinations and Goodwill 142
Leases 144
Provisions and Contingencies 153
Revenue 157
Government Grants of For-Profit Entities 160
Borrowing Costs 161
Share-based Payment 164
Impairment of Assets 169
Employee Benefits 171
Income Tax 176
Foreign Currency Translation 179
Hyperinflation 183
Events after the End of the Reporting Period 185
Related Party Disclosures 189
Biological Assets 204
Transition to Australian Accounting Standards – Simplified Disclosures 206
Specific Disclosures for Not-For-Profit Entities and Public Sector Entities 214
COMMENCEMENT OF THE LEGISLATIVE INSTRUMENT
APPENDICES
A Defined terms
B Effective date
C Amendments to other Standards
IMPLEMENTATION GUIDANCE
COMPILATION DETAILS
BASIS FOR CONCLUSIONS
BASIS FOR CONCLUSIONS ON aasb 2020-7
BASIS FOR CONCLUSIONS ON aasb 2020-9
BASIS FOR CONCLUSIONS ON aasb 2021-1
Basis for conclusions on AASB 2021-6
Basis for conclusions on AASB 2023-3
Basis for conclusions on AASB 2023-4
Australian Accounting Standard AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (as amended) is set out in paragraphs 1 – 243 and Appendices A – C. All the paragraphs have equal authority. Paragraphs in bold type state the main principles. Terms defined in Appendix A are in italics the first time they appear in the Standard. AASB 1060 is to be read in the context of other Australian Accounting Standards, including AASB 1048 Interpretation of Standards, which identifies the Australian Accounting Interpretations, and AASB 1057 Application of Australian Accounting Standards. In the absence of explicit guidance, AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying accounting policies.
Accounting Standard AASB 1060
The Australian Accounting Standards Board made Accounting Standard AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities under section 334 of the Corporations Act 2001 on 6 March 2020.
This compiled version of AASB 1060 applies to annual periods beginning on or after 1 January 2024 but before 1 January 2025. It incorporates relevant amendments contained in other AASB Standards made by the AASB up to and including 14 September 2023 (see Compilation Details).
Accounting Standard AASB 1060
General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities
1 This Standard establishes disclosure requirements applicable to entities that are preparing general purpose financial statements and elect to apply the Tier 2 reporting requirements under AASB 1053 Application of Tiers of Australian Accounting Standards.
2 Except to the extent specifically addressed in this Standard, the definitions and presentation requirements of other Australian Accounting Standards continue to apply. Entities are permitted to refer to other Standards for guidance on the requirements in this Standard, including AASB 7 Financial Instruments: Disclosures, AASB 12 Disclosure of Interests in Other Entities, AASB 101 Presentation of Financial Statements, AASB 107 Statement of Cash Flows and AASB 124 Related Party Disclosures.
3 This Standard applies to all entities that elect to apply Tier 2: Australian Accounting Standards – Simplified Disclosures under AASB 1053, including those that present consolidated financial statements in accordance with AASB 10 Consolidated Financial Statements and those that present separate financial statements in accordance with AASB 127 Separate Financial Statements. However, this Standard does not apply to the structure and content of condensed interim financial statements prepared in accordance with AASB 134 Interim Financial Reporting.
4 Entities applying this Standard are required to apply all the recognition and measurement requirements in Australian Accounting Standards[1] and apply this Standard in relation to disclosure requirements only.
5 This Standard uses terminology that is suitable for profit-oriented entities, including public sector business entities. If entities with not-for-profit activities in the private sector or the public sector apply this Standard, they may need to amend the descriptions used for particular line items in the financial statements and for the financial statements themselves.
6 Similarly, entities that do not have equity as defined in AASB 132 Financial Instruments: Presentation (eg some mutual funds) and entities whose share capital is not equity (eg some co-operative entities) may need to adapt the financial statement presentation of members’ or unitholders’ interests.
7 AusCF paragraphs and footnotes included in this Standard apply only to:
(a) not-for-profit entities; and
(b) for-profit entities that are not applying the Conceptual Framework for Financial Reporting (as identified in AASB 1048 Interpretation of Standards).
Such entities are referred to as ‘AusCF entities’. For AusCF entities, the term ‘reporting entity’ is defined in AASB 1057 Application of Australian Accounting Standards and Statement of Accounting Concepts SAC 1 Definition of the Reporting Entity also applies. For-profit entities applying the Conceptual Framework for Financial Reporting (as set out in paragraph Aus1.1 of the Conceptual Framework) shall not apply AusCF paragraphs or footnotes.
Financial Statement Presentation[2]
Scope
Fair presentation
(a) The application of the recognition and measurement requirements in Australian Accounting Standards and the disclosures in this Standard, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation of the financial position, financial performance and cash flows of Tier 2 entities.
(b) As explained in paragraph 13 of AASB 1053, this Standard does not apply to an entity with public accountability.
The additional disclosures referred to in (a) are necessary when compliance with the specific requirements in this Standard is insufficient to enable users to understand the effect of particular transactions, other events and conditions on the entity’s financial position and financial performance. [Based on IFRS for SMEs Standard paragraph 3.2]
AusCF9 Notwithstanding paragraph 9, in respect of AusCF entities, financial statements shall present fairly the financial position, financial performance and cash flows of an entity. Fair presentation requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework for the Preparation and Presentation of Financial Statements:
(a) The application of the recognition and measurement requirements in Australian Accounting Standards and the disclosures in this Standard, with additional disclosure when necessary, is presumed to result in financial statements that achieve a fair presentation of the financial position, financial performance and cash flows of Tier 2 entities.
(b) As explained in paragraph 13 of AASB 1053, this Standard does not apply to an entity with public accountability.
The additional disclosures referred to in (a) are necessary when compliance with the specific requirements in this Standard is insufficient to enable users to understand the effect of particular transactions, other events and conditions on the entity’s financial position and financial performance.
Compliance with Australian Accounting Standards – Simplified Disclosures
11 An entity shall disclose in the notes:
(a) the statutory basis or other reporting framework, if any, under which the financial statements are prepared; and
(b) whether, for the purposes of preparing the financial statements, it is a for-profit or not-for-profit entity.
12 Entities applying Australian Accounting Standards – Simplified Disclosures shall not depart from a requirement in an Australian Accounting Standard, including this Standard.
13 In the extremely rare circumstances when management concludes that compliance with a recognition and measurement requirement in an Australian Accounting Standard, or a presentation and disclosure requirement in this Standard, would be so misleading that it would conflict with the objective of financial statements set out in the Conceptual Framework for Financial Reporting, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing the following:
(a) the title of the Australian Accounting Standard in question, the nature of the requirement and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Conceptual Framework for Financial Reporting; and
(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.
[Based on IFRS for SMEs Standard paragraph 3.7]
AusCF13 Notwithstanding paragraph 13, in respect of AusCF entities, in the extremely rare circumstances when management concludes that compliance with a recognition and measurement requirement in an Australian Accounting Standard, or a presentation and disclosure requirement in this Standard, would be so misleading that it would conflict with the objective of financial statements set out in the Framework for the Preparation and Presentation of Financial Statements, but the relevant regulatory framework prohibits departure from the requirement, the entity shall, to the maximum extent possible, reduce the perceived misleading aspects of compliance by disclosing the following:
(a) the title of the Australian Accounting Standard in question, the nature of the requirement and the reason why management has concluded that complying with that requirement is so misleading in the circumstances that it conflicts with the objective of financial statements set out in the Framework for the Preparation and Presentation of Financial Statements; and
(b) for each period presented, the adjustments to each item in the financial statements that management has concluded would be necessary to achieve a fair presentation.
Going concern
14 When preparing financial statements, the management of an entity using Australian Accounting Standards – Simplified Disclosures shall make an assessment of the entity’s ability to continue as a going concern. An entity is a going concern unless management either intends to liquidate the entity or to cease operations, or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the reporting date. [IFRS for SMEs Standard paragraph 3.8]
15 When management is aware, in making its assessment, of material uncertainties related to events or conditions that cast significant doubt upon the entity’s ability to continue as a going concern, the entity shall disclose those uncertainties. When an entity does not prepare financial statements on a going concern basis, it shall disclose that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern. [IFRS for SMEs Standard paragraph 3.9]
Frequency of reporting
16 An entity shall present a complete set of financial statements (including comparative information – see paragraph 20) at least annually. When the end of an entity’s reporting period changes and the annual financial statements are presented for a period longer or shorter than one year, the entity shall disclose the following:
(a) that fact;
(b) the reason for using a longer or shorter period; and
(c) the fact that comparative amounts presented in the financial statements (including the related notes) are not entirely comparable.
[IFRS for SMEs Standard paragraph 3.10]
Consistency of presentation
17 An entity shall retain the presentation and classification of items in the financial statements from one period to the next unless:
(a) it is apparent, following a significant change in the nature of the entity’s operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors; or
(b) Australian Accounting Standards – Simplified Disclosures require a change in presentation.
[IFRS for SMEs Standard paragraph 3.11]
18 When the presentation or classification of items in the financial statements is changed, an entity shall reclassify comparative amounts unless the reclassification is impracticable. When comparative amounts are reclassified, an entity shall disclose the following:
(a) the nature of the reclassification;
(b) the amount of each item or class of items that is reclassified; and
(c) the reason for the reclassification.
[IFRS for SMEs Standard paragraph 3.12]
19 If it is impracticable to reclassify comparative amounts, an entity shall disclose why reclassification was not practicable. [IFRS for SMEs Standard paragraph 3.13]
Comparative information
Materiality and aggregation
21 An entity shall present separately each material class of similar items. An entity shall present separately items of a dissimilar nature or function unless they are immaterial. [IFRS for SMEs Standard paragraph 3.15]
22 Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. [Based on IFRS for SMEs Standard paragraph 3.16]
Offsetting
Complete set of financial statements
25 A complete set of financial statements of an entity shall include all of the following:
(a) a statement of financial position as at the reporting date;
(b) either:
(i) a single statement of profit or loss and other comprehensive income for the reporting period displaying all items of income and expense recognised during the period including those items recognised in determining profit or loss (which is a subtotal in the statement of comprehensive income) and items of other comprehensive income; or
(ii) a separate statement of profit or loss and a separate statement of comprehensive income. If an entity chooses to present both a statement of profit or loss and a statement of comprehensive income, the statement of comprehensive income begins with profit or loss and then displays the items of other comprehensive income;
(c) a statement of changes in equity for the reporting period;
(d) a statement of cash flows for the reporting period; and
(e) notes, comprising material accounting policy information and other explanatory information.
[Based on IFRS for SMEs Standard paragraph 3.17]
27 If an entity has no items of other comprehensive income in any of the periods for which financial statements are presented, it may present only a statement of profit or loss or it may present a statement of comprehensive income in which the ‘bottom line’ is labelled ‘profit or loss’. [IFRS for SMEs Standard paragraph 3.19]
28 Because paragraph 20 requires comparative amounts in respect of the previous period for all amounts presented in the financial statements, a complete set of financial statements means that an entity shall present, as a minimum, two of each of the required financial statements and related notes. [IFRS for SMEs Standard paragraph 3.20]
29 In a complete set of financial statements, an entity shall present each financial statement with equal prominence. [IFRS for SMEs Standard paragraph 3.21]
30 An entity may use titles for the financial statements other than those used in this Standard as long as they are not misleading. [IFRS for SMEs Standard paragraph 3.22]
Identification of the financial statements
31 An entity shall clearly identify each of the financial statements and the notes and distinguish them from other information in the same document. In addition, an entity shall display the following information prominently and repeat it when necessary for an understanding of the information presented:
(a) the name of the reporting entity and any change in its name since the end of the preceding reporting period;
(b) whether the financial statements cover the individual entity or a group of entities;
(c) the date of the end of the reporting period and the period covered by the financial statements;
(d) the presentation currency, as defined in AASB 121 The Effects of Changes in Foreign Exchange Rates; and
(e) the level of rounding, if any, used in presenting amounts in the financial statements.
[IFRS for SMEs Standard paragraph 3.23]
(a) the domicile and legal form of the entity, its country of incorporation and the address of its registered office (or principal place of business, if different from the registered office); and
(b) a description of the nature of the entity’s operations and its principal activities.
[IFRS for SMEs Standard paragraph 3.24]
Presentation of information not required by this Standard
Statement of Financial Position[3]
Scope of this section
Information to be presented in the statement of financial position
(a) cash and cash equivalents;
(b) trade and other receivables;
(c) financial assets (excluding amounts shown under (a), (b), (i) and (j));
(d) inventories;
(e) property, plant and equipment;
(f) investment property;
(g) intangible assets;
(h) biological assets;
(i) investments in associates;
(j) investments in joint ventures;
(k) trade and other payables;
(l) financial liabilities (excluding amounts shown under (k) and (o));
(m) liabilities and assets for current tax;
(n) deferred tax liabilities and deferred tax assets (these shall always be classified as non-current);
(o) provisions;
(p) non-controlling interests, presented within equity separately from the equity attributable to the owners of the parent;
(q) equity attributable to the owners of the parent;
(r) the total of assets classified as held for sale and assets included in disposal groups classified as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations; and
(s) liabilities included in disposal groups classified as held for sale in accordance with AASB 5.
[Based on IFRS for SMEs Standard paragraph 4.2]
36 An entity shall present additional line items, headings and subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. [IFRS for SMEs Standard paragraph 4.3]
Current/non-current distinction
37 An entity shall present current and non-current assets, and current and non-current liabilities, as separate classifications in its statement of financial position in accordance with paragraphs 38–41, except when a presentation based on liquidity provides information that is reliable and more relevant. When that exception applies, all assets and liabilities shall be presented in order of approximate liquidity (ascending or descending). [IFRS for SMEs Standard paragraph 4.4]
Current assets
38 An entity shall classify an asset as current when:
(a) it expects to realise the asset, or intends to sell or consume it, in the entity’s normal operating cycle;
(b) it holds the asset primarily for the purpose of trading;
(c) it expects to realise the asset within twelve months after the reporting date; or
(d) the asset is cash or a cash equivalent, unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting date.
[IFRS for SMEs Standard paragraph 4.5]
39 An entity shall classify all other assets as non-current. When the entity’s normal operating cycle is not clearly identifiable, its duration is assumed to be twelve months. [IFRS for SMEs Standard paragraph 4.6]
Current liabilities
40 An entity shall classify a liability as current when:
(a) it expects to settle the liability in the entity’s normal operating cycle;
(b) it holds the liability primarily for the purpose of trading;
(c) the liability is due to be settled within twelve months after the reporting date; or
(d) the entity does not have the right at the reporting date to defer settlement of the liability for at least twelve months after the reporting date.
[Based on IFRS for SMEs Standard paragraph 4.7]
41A Terms of a liability that could, at the option of the counterparty, result in its settlement by the transfer of the entity’s own equity instruments do not affect its classification as current or non-current if, applying AASB 132 Financial Instruments: Presentation, the entity classifies the option as an equity instrument, recognising it separately from the liability as an equity component of a compound financial instrument.
Sequencing of items and format of items in the statement of financial position
42 This Standard does not prescribe the sequence or format in which items are to be presented. Paragraph 35 simply provides a list of items that are sufficiently different in nature or function to warrant separate presentation in the statement of financial position. In addition:
(a) line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity’s financial position; and
(b) the descriptions used and the sequencing of items or aggregation of similar items may be amended according to the nature of the entity and its transactions, to provide information that is relevant to an understanding of the entity’s financial position.
[IFRS for SMEs Standard paragraph 4.9]
(a) the amounts, nature and liquidity of assets;
(b) the function of assets within the entity; and
(c) the amounts, nature and timing of liabilities.
[IFRS for SMEs Standard paragraph 4.10]
Information to be presented either in the statement of financial position or in the notes
(a) property, plant and equipment in classifications appropriate to the entity;
(b) trade and other receivables showing separately amounts due from related parties, amounts due from other parties and contract assets from contracts with customers;
(c) inventories, showing separately amounts of inventories:
(i) held for sale in the ordinary course of business;
(ii) in the process of production for such sale; and
(iii) in the form of materials or supplies to be consumed in the production process or in the rendering of services.
(d) trade and other payables, showing separately amounts payable to trade suppliers, amounts payable to related parties, contract liabilities from contracts with customers and accruals;
(e) provisions for employee benefits and other provisions; and
(f) classes of equity, such as paid-in capital, share premium, retained earnings and items of income and expense that, as required by Australian Accounting Standards, are recognised in other comprehensive income and presented separately in equity.
[Based on IFRS for SMEs Standard paragraph 4.11]
45 An entity with share capital shall disclose the following, either in the statement of financial position or in the notes:
(a) for each class of share capital:
(i) the number of shares authorised;
(ii) the number of shares issued and fully paid, and issued but not fully paid;
(iii) par value per share or that the shares have no par value;
(iv) a reconciliation of the number of shares outstanding at the beginning and at the end of the period. This reconciliation need not be presented for prior periods;
(v) the rights, preferences and restrictions attaching to that class including restrictions on the distribution of dividends and the repayment of capital;
(vi) shares in the entity held by the entity or by its subsidiaries or associates; and
(vii) shares reserved for issue under options and contracts for the sale of shares, including the terms and amounts; and
(b) a description of each reserve within equity.
[IFRS for SMEs Standard paragraph 4.12]
46 An entity without share capital, such as a partnership or trust, shall disclose information equivalent to that required by paragraph 45(a), showing changes during the period in each category of equity, and the rights, preferences and restrictions attaching to each category of equity. [IFRS for SMEs Standard paragraph 4.13]
(a) a description of the asset(s) or the group of assets and liabilities; and
(b) a description of the facts and circumstances of the sale, or leading to the expected disposal, and the expected manner and timing of that disposal.
[Based on IFRS for SMEs Standard paragraph 4.14]
47A In applying paragraph 40, an entity might classify liabilities arising from loan arrangements as non‑current when the entity’s right to defer settlement of those liabilities is subject to the entity complying with covenants within twelve months after the reporting date. In such situations, the entity shall disclose information in the notes that enables users of financial statements to understand the risk that the liabilities could become repayable within twelve months after the reporting date, including:
(a) information about the covenants (including the nature of the covenants and when the entity is required to comply with them) and the carrying amount of related liabilities; and
(b) facts and circumstances, if any, that indicate the entity may have difficulty complying with the covenants – for example, the entity having acted during or after the reporting period to avoid or mitigate a potential breach. Such facts and circumstances could also include the fact that the entity would not have complied with the covenants if they were to be assessed for compliance based on the entity’s circumstances at the reporting date.
Statement of Profit or Loss and Other Comprehensive Income[4]
Scope of this section
Presentation of total comprehensive income
49 An entity shall present its total comprehensive income for a period either:
(a) in a single statement of profit or loss and other comprehensive income, in which case the statement of comprehensive income presents all items of income and expense recognised in the period; or
(b) in two statements—a statement of profit or loss and a statement of comprehensive income—in which case the statement of profit or loss presents all items of income and expense recognised in the period except those that are recognised in total comprehensive income outside of profit or loss as permitted or required by other Australian Accounting Standards.
[IFRS for SMEs Standard paragraph 5.2]
50 A change from the single-statement approach to the two-statement approach, or vice versa, is a change in accounting policy to which AASB 108 applies. [IFRS for SMEs Standard paragraph 5.3]
Single-statement approach
(a) the effects of corrections of errors and changes in accounting policies are presented as retrospective adjustments of prior periods instead of as part of profit or loss in the period in which they arise (see AASB 108); and
(b) items of other comprehensive income are recognised as part of total comprehensive income, outside of profit or loss, when they arise.
[Based on IFRS for SMEs Standard paragraph 5.4]
(a) revenue;
(b) finance costs;
(c) share of the profit or loss of investments in associates and joint ventures accounted for using the equity method (see AASB 128 Investments in Associates and Joint Ventures);
(d) tax expense;
(e) a single amount for the total of:
(i) discontinued operations (see AASB 5 Non-current Assets Held for Sale and Discontinued Operations); and
(ii) the post-tax gain or loss attributable to an impairment, or reversal of an impairment, of the assets in the discontinued operation (see AASB 5), both at the time and subsequent to being classified as a discontinued operation and to the disposal of the net assets constituting the discontinued operation;
(f) profit or loss (if an entity has no items of other comprehensive income, this line need not be presented);
(g) each item of other comprehensive income (see paragraph 51(b)) classified by nature (excluding amounts in (h)). Such items shall be grouped into those that, in accordance with other Australian Accounting Standards:
(i) will not be reclassified subsequently to profit or loss; and
(ii) will be reclassified subsequently to profit or loss when specific conditions are met;
(h) share of the other comprehensive income of associates and joint ventures accounted for by the equity method; and
(i) total comprehensive income (if an entity has no items of other comprehensive income, it may use another term for this line such as profit or loss).
[Based on IFRS for SMEs Standard paragraph 5.5]
(a) profit or loss for the period attributable to:
(i) non-controlling interests; and
(ii) owners of the parent; and
(b) total comprehensive income for the period attributable to:
(i) non-controlling interests; and
(ii) owners of the parent.
[IFRS for SMEs Standard paragraph 5.6]
Two-statement approach
54 Under the two-statement approach, the statement of profit or loss shall display, as a minimum, line items that present the amounts in paragraph 52(a)–52(f) for the period, with profit or loss as the last line. The statement of comprehensive income shall begin with profit or loss as its first line and shall display, as a minimum, line items that present the amounts in paragraph 52(g)–52(i) and paragraph 53 for the period. [IFRS for SMEs Standard paragraph 5.7]
Requirements applicable to both approaches
55 Under AASB 108, the effects of corrections of errors and changes in accounting policies are presented as retrospective adjustments of prior periods instead of as part of profit or loss in the period in which they arise. [IFRS for SMEs Standard paragraph 5.8]
57 An entity shall not present or describe any items of income and expense as ‘extraordinary items’ in the statement(s) presenting profit or loss and other comprehensive income (or in the statement of profit or loss, if presented) or in the notes. [IFRS for SMEs Standard paragraph 5.10]
Analysis of expenses
Analysis by nature of expense
(a) Under this method of classification, expenses are aggregated in the statement(s) of profit and loss and other comprehensive income according to their nature (for example, depreciation, purchases of materials, transport costs, employee benefits and advertising costs) and are not reallocated among various functions within the entity.
Analysis by function of expense
(b) Under this method of classification, expenses are aggregated according to their function as part of cost of sales or, for example, the costs of distribution or administrative activities. At a minimum, an entity discloses its cost of sales under this method separately from other expenses.
[Based on IFRS for SMEs Standard paragraph 5.11]
Statement of Changes in Equity and Statement of Income and Retained Earnings[5]
Scope of this section
Statement of changes in equity
Purpose
60 The statement of changes in equity presents an entity’s profit or loss for a reporting period, other comprehensive income for the period, the effects of changes in accounting policies and corrections of errors recognised in the period and the amounts of investments by, and dividends and other distributions to, owners in their capacity as owners during the period. [IFRS for SMEs Standard paragraph 6.2]
Information to be presented in the statement of changes in equity
61 The statement of changes in equity includes the following information:
(a) total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests;
(b) for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with AASB 108; and
(c) for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:
(i) profit or loss;
(ii) other comprehensive income; and
(iii) the amounts of investments by, and dividends and other distributions to, owners in their capacity as owners, showing separately issues of shares, treasury share transactions, dividends and other distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.
[IFRS for SMEs Standard paragraph 6.3]
Statement of income and retained earnings
Purpose
62 The statement of income and retained earnings presents an entity’s profit or loss and changes in retained earnings for a reporting period. Paragraph 26 permits an entity to present a statement of income and retained earnings in place of a statement of comprehensive income and a statement of changes in equity if the only changes to its equity during the periods for which financial statements are presented arise from profit or loss, payment of dividends, corrections of prior period errors, and changes in accounting policy. [IFRS for SMEs Standard paragraph 6.4]
Information to be presented in the statement of income and retained earnings
63 An entity shall present, in the statement of income and retained earnings, the following items in addition to the information required by the section covering the Statement of Profit or Loss and Other Comprehensive Income:
(a) retained earnings at the beginning of the reporting period;
(b) dividends declared and paid or payable during the period;
(c) restatements of retained earnings for corrections of prior period errors;
(d) restatements of retained earnings for changes in accounting policy; and
(e) retained earnings at the end of the reporting period.
[IFRS for SMEs Standard paragraph 6.5]
Statement of Cash Flows[6]
Scope of this section
Cash equivalents
65 Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and that are subject to an insignificant risk of changes in value. They are held to meet short-term cash commitments instead of for investment or other purposes. Consequently, an investment normally qualifies as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition. Bank overdrafts are normally considered financing activities similar to borrowings. However, if they are repayable on demand and form an integral part of an entity’s cash management, bank overdrafts are a component of cash and cash equivalents. [IFRS for SMEs Standard paragraph 7.2]
Information to be presented in the statement of cash flows
66 An entity shall present a statement of cash flows that presents cash flows for a reporting period classified by operating activities, investing activities and financing activities. [IFRS for SMEs Standard paragraph 7.3]
Operating activities
67 Operating activities are the principal revenue-producing activities of the entity. Consequently, cash flows from operating activities generally result from the transactions and other events and conditions that enter into the determination of profit or loss. Examples of cash flows from operating activities are:
(a) cash receipts from the sale of goods and the rendering of services;
(b) cash receipts from royalties, fees, commissions and other revenue;
(c) cash payments to suppliers for goods and services;
(d) cash payments to and on behalf of employees;
(e) cash payments or refunds of income tax, unless they can be specifically identified with financing and investing activities; and
(f) cash receipts and payments from investments, loans and other contracts held for dealing or trading purposes, which are similar to inventory acquired specifically for resale.
Some transactions, such as the sale of an item of plant by a manufacturing entity, may give rise to a gain or loss that is included in profit or loss. However, the cash flows relating to such transactions are cash flows from investing activities. [IFRS for SMEs Standard paragraph 7.4]
Investing activities
68 Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Examples of cash flows arising from investing activities are:
(a) cash payments to acquire property, plant and equipment (including self-constructed property, plant and equipment), intangible assets and other long-term assets;
(b) cash receipts from sales of property, plant and equipment, intangibles and other long-term assets;
(c) cash payments to acquire equity or debt instruments of other entities and interests in joint ventures (other than payments for those instruments classified as cash equivalents or held for dealing or trading);
(d) cash receipts from sales of equity or debt instruments of other entities and interests in joint ventures (other than receipts for those instruments classified as cash equivalents or held for dealing or trading);
(e) cash advances and loans made to other parties;
(f) cash receipts from the repayment of advances and loans made to other parties;
(g) cash payments for futures contracts, forward contracts, option contracts and swap contracts, except when the contracts are held for dealing or trading, or the payments are classified as financing activities; and
(h) cash receipts from futures contracts, forward contracts, option contracts and swap contracts, except when the contracts are held for dealing or trading, or the receipts are classified as financing activities.
When a contract is accounted for as a hedge (see AASB 9 Financial Instruments and AASB 139 Financial Instruments: Recognition and Measurement), an entity shall classify the cash flows of the contract in the same manner as the cash flows of the item being hedged. [IFRS for SMEs Standard paragraph 7.5]
Financing activities
69 Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of an entity. Examples of cash flows arising from financing activities are:
(a) cash proceeds from issuing shares or other equity instruments;
(b) cash payments to owners to acquire or redeem the entity’s shares;
(c) cash proceeds from issuing debentures, loans, notes, bonds, mortgages and other short-term or long-term borrowings;
(d) cash repayments of amounts borrowed; and
(e) cash payments by a lessee for the reduction of the outstanding liability relating to a lease.
[IFRS for SMEs Standard paragraph 7.6]
Reporting cash flows from operating activities
70 An entity shall present cash flows from operating activities using either:
(a) the indirect method, whereby profit or loss is adjusted for the effects of non-cash transactions, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expense associated with investing or financing cash flows; or
(b) the direct method, whereby major classes of gross cash receipts and gross cash payments are disclosed.
[IFRS for SMEs Standard paragraph 7.7]
Indirect method
71 Under the indirect method, the net cash flow from operating activities is determined by adjusting profit or loss for the effects of:
(a) changes during the period in inventories and operating receivables and payables;
(b) non-cash items such as depreciation, provisions, deferred tax, accrued income (expenses) not yet received (paid) in cash, unrealised foreign currency gains and losses, undistributed profits of associates and non-controlling interests; and
(c) all other items for which the cash effects relate to investing or financing.
[IFRS for SMEs Standard paragraph 7.8]
Direct method
73 Under the direct method, net cash flow from operating activities is presented by disclosing information about major classes of gross cash receipts and gross cash payments. Such information may be obtained either:
(a) from the accounting records of the entity; or
(b) by adjusting sales, cost of sales and other items in the statement of comprehensive income (or the statement of profit or loss, if presented) for:
(i) changes during the period in inventories and operating receivables and payables;
(ii) other non-cash items; and
(iii) other items for which the cash effects are investing or financing cash flows.
[IFRS for SMEs Standard paragraph 7.9]
Reporting cash flows from investing and financing activities
74 An entity shall present separately major classes of gross cash receipts and gross cash payments arising from investing and financing activities. The aggregate cash flows arising from acquisitions and from disposals of subsidiaries or other business units shall be presented separately and classified as investing activities. [IFRS for SMEs Standard paragraph 7.10]
Reporting cash flows on a net basis
(a) cash receipts and payments on behalf of customers when the cash flows reflect the activities of the customer rather than those of the entity; and
(b) cash receipts and payments for items in which the turnover is quick, the amounts are large, and the maturities are short.
76 Examples of cash receipts and payments referred to in paragraph 75(a) are:
(a) the acceptance and repayment of demand deposits of a bank;
(b) funds held for customers by an investment entity; and
(c) rents collected on behalf of, and paid over to, the owners of properties.
77 Examples of cash receipts and payments referred to in paragraph 75(b) are advances made for, and the repayment of:
(a) principal amounts relating to credit card customers;
(b) the purchase and sale of investments; and
(c) other short-term borrowings, for example, those which have a maturity period of three months or less.
(a) cash receipts and payments for the acceptance and repayment of deposits with a fixed maturity date;
(b) the placement of deposits with and withdrawal of deposits from other financial institutions; and
(c) cash advances and loans made to customers and the repayment of those advances and loans.
Foreign currency cash flows
79 An entity shall record cash flows arising from transactions in a foreign currency in the entity’s functional currency by applying to the foreign currency amount the exchange rate between the functional currency and the foreign currency at the date of the cash flow. Paragraph 40 in AASB 121 explains when an exchange rate that approximates the actual rate can be used. [IFRS for SMEs Standard paragraph 7.11]
81 Unrealised gains and losses arising from changes in foreign currency exchange rates are not cash flows. However, to reconcile cash and cash equivalents at the beginning and the end of the period, the effect of exchange rate changes on cash and cash equivalents held or due in a foreign currency must be presented in the statement of cash flows. Consequently, the entity shall remeasure cash and cash equivalents held during the reporting period (such as amounts of foreign currency held and foreign currency bank accounts) at period-end exchange rates. The entity shall present the resulting unrealised gain or loss separately from cash flows from operating, investing and financing activities. [IFRS for SMEs Standard paragraph 7.13]
Interest and dividends
82 An entity shall present separately cash flows from interest and dividends received and paid. The entity shall classify cash flows consistently from period to period as operating, investing or financing activities. [IFRS for SMEs Standard paragraph 7.14]
83 An entity may classify interest paid and interest and dividends received as operating cash flows because they are included in profit or loss. Alternatively, the entity may classify interest paid and interest and dividends received as financing cash flows and investing cash flows respectively, because they are costs of obtaining financial resources or returns on investments. [IFRS for SMEs Standard paragraph 7.15]
Income tax
85 An entity shall present separately cash flows arising from income tax and shall classify them as cash flows from operating activities unless they can be specifically identified with financing and investing activities. When tax cash flows are allocated over more than one class of activity, the entity shall disclose the total amount of taxes paid. [IFRS for SMEs Standard paragraph 7.17]
Non-cash transactions
86 An entity shall exclude from the statement of cash flows investing and financing transactions that do not require the use of cash or cash equivalents. An entity shall disclose such transactions elsewhere in the financial statements in a way that provides all the relevant information about those investing and financing activities. [IFRS for SMEs Standard paragraph 7.18]
87 Many investing and financing activities do not have a direct impact on current cash flows even though they affect the capital and asset structure of an entity. The exclusion of non-cash transactions from the statement of cash flows is consistent with the objective of a statement of cash flows because these items do not involve cash flows in the current period. Examples of non-cash transactions are:
(a) the acquisition of assets either by assuming directly related liabilities or by means of a lease;
(b) the acquisition of an entity by means of an equity issue; and
(c) the conversion of debt to equity.
[IFRS for SMEs Standard paragraph 7.19]
Components of cash and cash equivalents
88 An entity shall present the components of cash and cash equivalents and shall present a reconciliation of the amounts presented in the statement of cash flows to the equivalent items presented in the statement of financial position. However, an entity is not required to present this reconciliation if the amount of cash and cash equivalents presented in the statement of cash flows is identical to the amount similarly described in the statement of financial position. [IFRS for SMEs Standard paragraph 7.20]
Other disclosures
89 An entity shall disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the entity that are not available for use by the entity. Cash and cash equivalents held by an entity may not be available for use by the entity because of, among other reasons, foreign exchange controls or legal restrictions. [IFRS for SMEs Standard paragraph 7.21]
Notes to the Financial Statements[7]
Scope of this section
Structure of the notes
(a) present information about the basis of preparation of the financial statements and the specific accounting policies used, in accordance with paragraphs 95–97;
(b) disclose the information required by this Standard that is not presented elsewhere in the financial statements; and
(c) provide information that is not presented elsewhere in the financial statements but is relevant to an understanding of any of them.
[IFRS for SMEs Standard paragraph 8.2]
92 An entity shall, as far as practicable, present the notes in a systematic manner. An entity shall cross-reference each item in the financial statements to any related information in the notes. [IFRS for SMEs Standard paragraph 8.3]
93 Examples of systematic ordering or grouping of the notes include:
(a) giving prominence to the areas of its activities that the entity considers to be most relevant to an understanding of its financial performance and financial position, such as grouping together information about particular operating activities;
(b) grouping together information about items measured similarly such as assets measured at fair value; or
(c) following the order of the line items in the statement(s) of profit or loss and other comprehensive income and the statement of financial position, such as:
(i) statement of compliance with Australian Accounting Standards – Simplified Disclosures (see paragraph 10);
(ii) material accounting policy information (see paragraph 95);
(iii) supporting information for items presented in the statements of financial position and in the statement(s) of profit or loss and other comprehensive income, and in the statements of changes in equity and of cash flows, in the order in which each statement and each line item is presented; and
(iv) other disclosures, including:
(1) contingent liabilities (see paragraph 154) and unrecognised contractual commitments; and
(2) non-financial disclosures.
[Based on IFRS for SMEs Standard paragraph 8.4]
Disclosure of accounting policy information
[Based on IFRS for SMEs Standard paragraph 8.5]
Information about judgements
Information about key sources of estimation uncertainty
(a) their nature; and
(b) their carrying amount as at the end of the reporting period.
[IFRS for SMEs Standard paragraph 8.7]
Audit fees
(a) the audit or review of the financial statements; and
(b) all other services performed during the reporting period.
99 For paragraph 98, an entity shall describe the nature of other services.
Imputation credits
(a) imputation credits that will arise from the payment of the amount of the provision for income tax;
(b) imputation debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c) imputation credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Consolidated and Separate Financial Statements[8]
Disclosures in consolidated financial statements
104 The following disclosures shall be made in consolidated financial statements:
(a) the fact that the statements are consolidated financial statements;
(b) the basis for concluding that control exists when the parent does not own, directly or indirectly through subsidiaries, more than half of the voting power;
(c) any difference in the reporting date of the financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements; and
(d) the nature and extent of any significant restrictions (for example resulting from borrowing arrangements or regulatory requirements) on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans.
[IFRS for SMEs Standard paragraph 9.23]
Disclosures in separate financial statements
(a) that the statements are separate financial statements; and
(b) a description of the methods used to account for the investments in subsidiaries, joint ventures and associates,
and shall identify the consolidated financial statements or other primary financial statements to which they relate.
[IFRS for SMEs Standard paragraph 9.27]
Accounting Policies, Estimates and Errors[9]
Disclosure of a change in accounting policy
(a) the nature of the change in accounting policy;
(b) for the current period and each prior period presented, to the extent practicable, the amount of the adjustment for each financial statement line item affected;
(c) the amount of the adjustment relating to periods before those presented, to the extent practicable; and
(d) an explanation if it is impracticable to determine the amounts to be disclosed in (b) or (c).
Financial statements of subsequent periods need not repeat these disclosures.
[Based on IFRS for SMEs Standard paragraph 10.13]
107A In the reporting period in which an entity first applies AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2, the entity is not required to disclose the information that would otherwise be required by paragraph 106(b) in respect of the accounting policy changes made in applying AASB 2020-8.
108 When a voluntary change in accounting policy has an effect on the current period or any prior period, an entity shall disclose the following:
(a) the nature of the change in accounting policy;
(b) the reasons why applying the new accounting policy provides reliable and more relevant information;
(c) to the extent practicable, the amount of the adjustment for each financial statement line item affected, shown separately:
(i) for the current period;
(ii) for each prior period presented; and
(iii) in the aggregate for periods before those presented; and
(d) an explanation if it is impracticable to determine the amounts to be disclosed in (c).
Financial statements of subsequent periods need not repeat these disclosures.
[IFRS for SMEs Standard paragraph 10.14]
Disclosure of a change in estimate
109 An entity shall disclose the nature of any change in an accounting estimate and the effect of the change on assets, liabilities, income and expense for the current period. If it is practicable for the entity to estimate the effect of the change in one or more future periods, the entity shall disclose those estimates. [IFRS for SMEs Standard paragraph 10.18]
Disclosure of prior period errors
110 An entity shall disclose the following about prior period errors:
(a) the nature of the prior period error;
(b) for each prior period presented, to the extent practicable, the amount of the correction for each financial statement line item affected;
(c) to the extent practicable, the amount of the correction at the beginning of the earliest prior period presented; and
(d) an explanation if it is not practicable to determine the amounts to be disclosed in (b) or (c).
Financial statements of subsequent periods need not repeat these disclosures.
[IFRS for SMEs Standard paragraph 10.23]
Basic Financial Instruments[10]
Disclosure of accounting policies for financial instruments
112 In accordance with paragraph 95, an entity shall disclose material accounting policy information. Information about the measurement basis (or bases) for financial instruments used in preparing the financial statements is expected to be material accounting policy information. [Based on IFRS for SMEs Standard paragraph 11.40]
Statement of financial position—categories of financial assets and financial liabilities
(a) financial assets measured at fair value through profit or loss;
(b) financial assets measured at amortised cost;
(c) financial liabilities measured at fair value through profit or loss;
(d) financial liabilities measured at amortised cost; and
(e) financial assets measured at fair value through other comprehensive income, showing separately:
(i) financial assets that are measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A of AASB 9; and
(ii) investments in equity instruments designated as such upon initial recognition in accordance with paragraph 5.7.5 of AASB 9.
[Based on IFRS for SMEs Standard paragraph 11.41]
Derecognition
116 If an entity has transferred financial assets to another party in a transaction that does not qualify for derecognition (see paragraph 3.2.15 of AASB 9), the entity shall disclose the following for each class of such financial assets:
(a) the nature of the assets;
(b) the nature of the risks and rewards of ownership to which the entity remains exposed; and
(c) the carrying amounts of the assets and of any associated liabilities that the entity continues to recognise.
[IFRS for SMEs Standard paragraph 11.45]
Collateral
117 When an entity has pledged financial assets as collateral for liabilities or contingent liabilities, it shall disclose the following:
(a) the carrying amount of the financial assets pledged as collateral; and
(b) the terms and conditions relating to its pledge.
[IFRS for SMEs Standard paragraph 11.46]
Defaults and breaches on loans payable
118 For loans payable recognised at the reporting date for which there is a breach of terms or a default of principal, interest, sinking fund or redemption terms that have not been remedied by the reporting date, an entity shall disclose the following:
(a) details of that breach or default;
(b) the carrying amount of the related loans payable at the reporting date; and
(c) whether the breach or default was remedied, or the terms of the loans payable were renegotiated, before the financial statements were authorised for issue.
[IFRS for SMEs Standard paragraph 11.47]
Items of income, expense, gains or losses
119 An entity shall disclose the following items of income, expense, gains or losses:
(a) income, expense, gains or losses, including changes in fair value, recognised on:
(i) financial assets measured at fair value through profit or loss;
(ii) financial liabilities measured at fair value through profit or loss;
(iii) financial assets measured at amortised cost;
(iv) financial liabilities measured at amortised cost;
(v) investments in equity instruments designated at fair value through other comprehensive income in accordance with paragraph 5.7.5 of AASB 9; and
(vi) financial assets measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A of AASB 9, showing separately the amount of gain or loss recognised in other comprehensive income during the period and the amount reclassified upon derecognition from accumulated other comprehensive income to profit or loss for the period;
(b) total interest income and total interest expense (calculated using the effective interest method) for financial assets or financial liabilities that are not measured at fair value through profit or loss; and
(c) the amount of any impairment loss for each class of financial asset.
[Based on IFRS for SMEs Standard paragraph 11.48]
Other Financial Instrument Issues – Hedging Disclosures[11]
(a) a description of the hedge;
(b) a description of the financial instruments designated as hedging instruments and their fair values at the reporting date; and
(c) the nature of the risks being hedged, including a description of the hedged item.
[Based on IFRS for SMEs Standard paragraph 12.27]
121 For fair value hedges, the entity shall disclose the following:
(a) the amount of the change in fair value of the hedging instrument recognised in profit or loss for the period; and
(b) the amount of the change in fair value of the hedged item recognised in profit or loss for the period.
[Based on IFRS for SMEs Standard paragraph 12.28]
(a) the periods when the cash flows are expected to occur and when they are expected to affect profit or loss;
(b) a description of any forecast transaction for which hedge accounting had previously been used, but which is no longer expected to occur;
(c) the amount of the change in fair value of the hedging instrument that was recognised in other comprehensive income during the period;
(d) the amount that was reclassified to profit or loss for the period; and
(e) the amount of any excess of the cumulative change in fair value of the hedging instrument over the cumulative change in the fair value of the expected cash flows that was recognised in profit or loss for the period.
[Based on IFRS for SMEs Standard paragraph 12.29]
Inventories[12]
123 An entity shall disclose the following:
(a) material accounting policy information about the measurement of inventories, including the cost formula used;
(b) the total carrying amount of inventories and the carrying amount in classifications appropriate to the entity;
(c) the amount of inventories recognised as an expense during the period;
(d) impairment losses recognised or reversed in profit or loss in accordance with AASB 102 Inventories; and
(e) the total carrying amount of inventories pledged as security for liabilities.
[Based on IFRS for SMEs Standard paragraph 13.22]
Investments in Associates[13]
125 An entity shall disclose the following:
(a) material accounting policy information for investments in associates;
(b) the carrying amount of investments in associates (see paragraph 35(i)); and
(c) the fair value of investments in associates accounted for using the equity method for which there are published price quotations.
[Based on IFRS for SMEs Standard paragraph 14.12]
127 For investments in associates accounted for by the equity method, an investor shall disclose separately its share of the profit or loss of such associates and its share of any discontinued operations of such associates. [IFRS for SMEs Standard paragraph 14.14]
Investments in Joint Ventures[14]
129 An entity shall disclose the following:
(a) material accounting policy information for recognising its interests in joint ventures;
(b) the carrying amount of investments in joint ventures (see paragraph 35(j));
(c) the fair value of investments in joint ventures accounted for using the equity method for which there are published price quotations; and
(d) the aggregate amount of its commitments relating to joint ventures, including its share in the capital commitments that have been incurred jointly with other venturers, as well as its share of the capital commitments of the joint ventures themselves.
[Based on IFRS for SMEs Standard paragraph 15.19]
130 For joint ventures accounted for in accordance with the equity method, the venturer shall also make the disclosures required by paragraph 127 for equity method investments. [IFRS for SMEs Standard paragraph 15.20]
Investment Property at Fair Value[15]
132 An entity shall disclose the following for all investment property accounted for at fair value through profit or loss (paragraph 33 of AASB 140 Investment Property):
(a) the methods and significant assumptions applied in determining the fair value of investment property;
(b) the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and class of the investment property being valued. If there has been no such valuation, that fact shall be disclosed;
(c) the existence and amounts of restrictions on the realisability of investment property or the remittance of income and proceeds of disposal;
(d) contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements; and
(e) a reconciliation between the carrying amounts of investment property at the beginning and end of the period, showing separately:
(i) additions, disclosing separately those additions resulting from acquisitions through business combinations;
(ii) net gains or losses from fair value adjustments;
(iii) transfers to and from investment property carried at cost less accumulated depreciation and impairment (see paragraph 57 of AASB 140);
(iv) transfers to and from inventories and owner-occupied property; and
(v) other changes.
This reconciliation need not be presented for prior periods. [IFRS for SMEs Standard paragraph 16.10]
133 1n accordance with the section covering Leases, the owner of an investment property provides lessors’ disclosures about leases into which it has entered. A lessee that holds a right-of-use asset that is an investment property provides lessees’ disclosures as required by that section for any leases into which it has entered. [Based on IFRS for SMEs Standard paragraph 16.11]
Property, Plant and Equipment and Investment Property at Cost[16]
(a) the measurement bases used for determining the gross carrying amount;
(b) the depreciation methods used;
(c) the useful lives or the depreciation rates used;
(d) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the reporting period; and
(e) a reconciliation of the carrying amount at the beginning and end of the reporting period, showing separately:
(i) additions;
(ii) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with AASB 5 and other disposals;
(iii) acquisitions through business combinations;
(iv) increases or decreases resulting from revaluations under AASB 116 and from impairment losses recognised or reversed in other comprehensive income in accordance with AASB 136 Impairment of Assets;
(v) transfers to and from investment property carried at fair value through profit or loss (see paragraph 57 of AASB 140);
(vi) impairment losses recognised or reversed in profit or loss in accordance with AASB 136;
(vii) depreciation; and
(viii) other changes.
This reconciliation need not be presented for prior periods.
[Based on IFRS for SMEs Standard paragraph 17.31]
135 An entity shall also disclose the following:
(a) the existence and carrying amounts of property, plant and equipment to which the entity has restricted title or that is pledged as security for liabilities;
(b) the amount of contractual commitments for the acquisition of property, plant and equipment; and
(c) if an entity has investment property whose fair value cannot be measured reliably, it shall disclose that fact and the reasons why fair value cannot be measured reliably for those items of investment property.
[Based on IFRS for SMEs Standard paragraph 17.32]
136 If items of property, plant and equipment are stated at revalued amounts, an entity shall disclose the following:
(a) the effective date of the revaluation;
(b) whether an independent valuer was involved;
(c) the methods and significant assumptions applied in estimating the items’ fair values; and
(d) the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders.
[Based on IFRS for SMEs Standard paragraph 17.33]
Intangible Assets other than Goodwill[17]
137 An entity shall disclose the following for each class of intangible assets:
(a) the useful lives or the amortisation rates used;
(b) the amortisation methods used;
(c) the gross carrying amount and any accumulated amortisation (aggregated with accumulated impairment losses) at the beginning and end of the reporting period;
(d) the line item(s) in the statement of profit or loss and other comprehensive income (if presented), the statement of profit or loss and the statement of comprehensive income (if presented), or the combined statement of income and retained earnings (if presented) in which any amortisation of intangible assets is included; and
(e) a reconciliation of the carrying amount at the beginning and end of the reporting period, showing separately:
(i) additions;
(ii) assets classified as held for sale or included in a disposal group classified as held for sale in accordance with AASB 5 and other disposals;
(iii) acquisitions through business combinations;
(iv) increases or decreases resulting from revaluations under AASB 138 and from impairment losses recognised or reversed in other comprehensive income in accordance with AASB 136;
(v) amortisation;
(vi) impairment losses recognised or reversed in profit or loss in accordance with AASB 136; and
(vii) other changes.
This reconciliation need not be presented for prior periods.
[Based on IFRS for SMEs Standard paragraph 18.27]
138 An entity shall also disclose:
(a) a description, the carrying amount and remaining amortisation period of any individual intangible asset that is material to the entity’s financial statements;
(b) for intangible assets acquired by way of a government grant and initially recognised at fair value (see paragraph 44 of AASB 138):
(i) the fair value initially recognised for these assets; and
(ii) their carrying amounts;
(c) the existence and carrying amounts of intangible assets to which the entity has restricted title or that are pledged as security for liabilities; and
(d) the amount of contractual commitments for the acquisition of intangible assets.
[IFRS for SMEs Standard paragraph 18.28]
140 If items of intangible assets are stated at revalued amounts, an entity shall disclose the following:
(a) the effective date of the revaluation;
(b) whether an independent valuer was involved;
(c) the methods and significant assumptions applied in estimating the items’ fair values; and
(d) the revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders.
141 An entity shall also disclose for an intangible asset assessed as having an indefinite useful life, the carrying amount of that asset and the reasons supporting the assessment of an indefinite useful life. In giving these reasons, the entity shall describe the factor(s) that played a significant role in determining that the asset has an indefinite useful life.
Business Combinations and Goodwill[18]
For business combination(s) during the reporting period
142 For each business combination during the period, the acquirer shall disclose the following:
(a) the names and descriptions of the combining entities or businesses;
(b) the acquisition date;
(c) the percentage of voting equity instruments acquired;
(d) the cost of the combination and a description of the components of that cost (such as cash, equity instruments and debt instruments);
(e) the amounts recognised at the acquisition date for each class of the acquiree’s assets, liabilities and contingent liabilities, including goodwill;
(f) the amount of any excess recognised in profit or loss in accordance with paragraph 34 of AASB 3 Business Combinations and the line item in the statement of comprehensive income (and in the statement of profit or loss, if presented) in which the excess is recognised;
(g) a qualitative description of the factors that make up the goodwill recognised, such as expected synergies from combining operations of the acquiree and the acquirer, or intangible assets or other items not recognised in accordance with paragraphs 10–14 of AASB 3; and
(h) for each business combination in which the acquirer holds less than 100 per cent of the equity interests in the acquiree at the acquisition date, the acquirer shall disclose the amount of the non-controlling interest in the acquiree recognised at the acquisition date and the measurement basis for that amount.
[Based on IFRS for SMEs Standard paragraph 19.25]
For all business combinations
143 An acquirer shall disclose a reconciliation of the carrying amount of goodwill at the beginning and end of the reporting period, showing separately:
(a) changes arising from new business combinations;
(b) impairment losses;
(c) disposals of previously acquired businesses; and
(d) other changes.
This reconciliation need not be presented for prior periods. [Based on IFRS for SMEs Standard paragraph 19.26]
144 A lessee shall make the following disclosures for leases:
(a) for each class of underlying asset, the net carrying amount of the right-of-use asset at the end of the reporting period;
(b) the total of future lease payments at the end of the reporting period, for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years; and
(iii) later than five years; and
(c) a general description of the lessee’s significant leasing arrangements including, for example, information about variable lease payments, extension and termination options, residual value guarantees, subleases and restrictions imposed by lease arrangements.
[Based on IFRS for SMEs Standard paragraph 20.13]
145 In addition, the requirements for disclosure about assets in accordance with paragraphs 134(e)(i) and (vii) and 136 apply to lessees for the right-of-use assets. [Based on IFRS for SMEs Standard paragraph 20.14]
(a) the amount of its lease commitments for short-term leases if the portfolio of short-term leases to which it is committed at the end of the reporting period is dissimilar to the portfolio of short-term leases to which the short-term lease expense disclosed applying paragraph (b) below relates; and
(b) lease payments recognised as an expense.
[Based on IFRS for SMEs Standard paragraph 20.16]
146A If a lessee applies the practical expedient in paragraph 46A of AASB 16, the lessee shall disclose:
(a) that it has applied the practical expedient to all rent concessions that meet the conditions in AASB 16 paragraph 46B or, if not applied to all such rent concessions, information about the nature of the contracts to which it has applied the practical expedient (see AASB 16 paragraph 2); and
(b) the amount recognised in profit or loss for the reporting period to reflect changes in lease payments that arise from rent concessions to which the lessee has applied the practical expedient in AASB 16 paragraph 46A.
In the reporting period in which a lessee first applies the practical expedient in AASB 16 paragraph 46A, the lessee is not required to disclose the information that would otherwise be required by paragraph 106(b) in respect of the accounting policy changes made in applying the practical expedient.
Finance Leases – Lessors
147 A lessor shall make the following disclosures for finance leases:
(a) a reconciliation between the gross investment in the lease at the end of the reporting period and the present value of lease payments receivable at the end of the reporting period. In addition, a lessor shall disclose the gross investment in the lease and the present value of lease payments receivable at the end of the reporting period, for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years; and
(iii) later than five years;
(b) unearned finance income;
(c) the unguaranteed residual values accruing to the benefit of the lessor;
(d) the loss allowance for uncollectable lease payments receivable;
(e) income relating to variable lease payments not included in the measurement of the net investment in the lease; and
(f) a general description of the lessor’s significant leasing arrangements, including, for example, information about variable lease payments, renewal or purchase options and escalation clauses, subleases, and restrictions imposed by lease arrangements.
[Based on IFRS for SMEs Standard paragraph 20.23]
Operating Leases – Lessors
148 A lessor shall disclose the following for operating leases:
(a) the future lease payments under non-cancellable operating leases for each of the following periods:
(i) not later than one year;
(ii) later than one year and not later than five years; and
(iii) later than five years;
(b) total variable lease payments that do not depend on an index, or a rate, recognised as income; and
(c) a general description of the lessor’s significant leasing arrangements, including, for example, information about variable lease payments, renewal or purchase options and escalation clauses and restrictions imposed by lease arrangements.
[Based on IFRS for SMEs Standard paragraph 20.30]
149 In addition, the requirements for disclosure about assets in accordance with the sections covering of Property, Plant and Equipment and Investment Property at Cost, Intangible Assets other than Goodwill, and Impairment of Assets apply to lessors for assets provided under operating leases. [IFRS for SMEs Standard paragraph 20.31]
Sale and leaseback transactions
150 Disclosure requirements for lessees and lessors apply equally to sale and leaseback transactions. The required description of significant leasing arrangements includes description of unique or unusual provisions of the agreement or terms of the sale and leaseback transactions. [IFRS for SMEs Standard paragraph 20.35]
Not-for-profit lessees – Leases with significantly below-market terms and conditions
(a) the entity’s dependence on leases that have significantly below-market terms and conditions principally to enable the entity to further its objectives; and
(b) the nature and terms of the leases, including:
(i) the lease payments;
(ii) the lease term;
(iii) a description of the underlying assets; and
(iv) restrictions on the use of the underlying assets specific to the entity.
Provisions and Contingencies[20]
Disclosures about provisions
153 For each class of provision, an entity shall disclose all of the following:
(a) a reconciliation showing:
(i) the carrying amount at the beginning and end of the period;
(ii) additions during the period, including adjustments that result from changes in measuring the discounted amount;
(iii) amounts charged against the provision during the period; and
(iv) unused amounts reversed during the period;
(b) a brief description of the nature of the obligation and the expected amount and timing of any resulting payments;
(c) an indication of the uncertainties about the amount or timing of those outflows; and
(d) the amount of any expected reimbursement, stating the amount of any asset that has been recognised for that expected reimbursement.
Comparative information for prior periods is not required. [IFRS for SMEs Standard paragraph 21.14]
Disclosures about contingent liabilities
(a) an estimate of its financial effect, measured in accordance with paragraphs 36–52 of AASB 137 Provisions, Contingent Liabilities and Contingent Assets;
(b) an indication of the uncertainties relating to the amount or timing of any outflow; and
(c) the possibility of any reimbursement.
If it is impracticable to make one or more of these disclosures, that fact shall be stated. [IFRS for SMEs Standard paragraph 21.15]
Disclosures about contingent assets
Prejudicial disclosures
156 In extremely rare cases, disclosure of some or all of the information required by paragraphs 153–155 can be expected to prejudice seriously the position of the entity in a dispute with other parties on the subject matter of the provision, contingent liability or contingent asset. In such cases, an entity need not disclose the information, but shall disclose the general nature of the dispute, together with the fact that, and reason why, the information has not been disclosed. [IFRS for SMEs Standard paragraph 21.17]
Revenue[21]
General disclosures about revenue
157 An entity shall disclose:
(a) information about its performance obligations in contracts with customers, including a description of when the entity typically satisfies its performance obligations, the significant payment terms, the nature of the goods or services that the entity has promised to transfer, obligations for returns, refunds and other similar obligations and types of warranties and related obligations; and
(b) the amount of each category of revenue recognised during the period, disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. An entity applies the guidance in AASB 15 Revenue from Contracts with Customers paragraphs B87–B89 when selecting the categories to use to disaggregate revenue.
[Based on IFRS for SMEs Standard paragraph 23.30]
Disclosures relating to performance obligations satisfied over time
158 For performance obligations that an entity satisfies over time, an entity shall disclose the methods used to recognise revenue (for example, a description of the output methods or input methods used and how those methods are applied). [Based on IFRS for SMEs Standard paragraph 23.31]
159 An entity shall disclose the closing balances of contract assets and contract liabilities from contracts with customers, if not otherwise separately presented or disclosed. [Based on IFRS for SMEs Standard paragraph 23.32]
Government Grants of For-Profit Entities[22]
160 A for-profit entity shall disclose the following:
(a) the nature and amounts of government grants recognised in the financial statements;
(b) unfulfilled conditions and other contingencies attaching to government grants that have been recognised in income;
(c) an indication of other forms of government assistance as defined in AASB 120 Accounting for Government Grants and Disclosure of Government Assistance from which the entity has directly benefited; and
(d) material accounting policy information for government grants, including the methods of presentation adopted in the financial statements.
[Based on IFRS for SMEs Standard paragraph 24.6]
Borrowing Costs[23]
161 Paragraph 52(b) requires disclosure of finance costs. Paragraph 119(b) requires disclosure of total interest expense (using the effective interest method) for financial liabilities that are not measured at fair value through profit or loss. [IFRS for SMEs Standard paragraph 25.3]
162 An entity shall disclose the amount of borrowing costs capitalised during the period.
Share-based Payment[24]
164 An entity shall disclose the following information about the nature and extent of share-based payment arrangements that existed during the period:
(a) a description of each type of share-based payment arrangement that existed at any time during the period, including the general terms and conditions of each arrangement, such as vesting requirements, the maximum term of options granted, and the method of settlement (for example, whether in cash or equity). An entity with substantially similar types of share-based payment arrangements may aggregate this information; and
(b) the number and weighted average exercise prices of share options for each of the following groups of options:
(i) outstanding at the beginning of the period;
(ii) granted during the period;
(iii) forfeited during the period;
(iv) exercised during the period;
(v) expired during the period;
(vi) outstanding at the end of the period; and
(vii) exercisable at the end of the period.
[IFRS for SMEs Standard paragraph 26.18]
165 For equity-settled share-based payment arrangements, an entity shall disclose information about how it measured the fair value of goods or services received or the value of the equity instruments granted. If a valuation methodology was used, the entity shall disclose the method and its reason for choosing it. [IFRS for SMEs Standard paragraph 26.19]
166 For cash-settled share-based payment arrangements, an entity shall disclose information about how the liability was measured. [IFRS for SMEs Standard paragraph 26.20]
167 For share-based payment arrangements that were modified during the period, an entity shall disclose an explanation of those modifications. [IFRS for SMEs Standard paragraph 26.21]
168 An entity shall disclose the following information about the effect of share-based payment transactions on the entity’s profit or loss for the period and on its financial position:
(a) the total expense recognised in profit or loss for the period; and
(b) the total carrying amount at the end of the period for liabilities arising from share-based payment transactions.
[IFRS for SMEs Standard paragraph 26.23]
169 An entity shall disclose the following for each class of assets indicated in paragraph 170:
(a) the amount of impairment losses recognised in profit or loss during the period and the line item(s) in the statement of comprehensive income (and in the statement of profit or loss, if presented) in which those impairment losses are included; and
(b) the amount of reversals of impairment losses recognised in profit or loss during the period and the line item(s) in the statement of comprehensive income (and in the statement of profit or loss, if presented) in which those impairment losses are reversed.
[IFRS for SMEs Standard paragraph 27.32]
(a) property, plant and equipment;
(b) investment property accounted for by the cost method;
(c) goodwill;
(d) intangible assets other than goodwill;
(e) investments in associates; and
(f) investments in joint ventures.
[Based on IFRS for SMEs Standard paragraph 27.33]
Employee Benefits[26]
Disclosures about short-term employee benefits
171 This section does not require specific disclosures about short-term employee benefits. [IFRS for SMEs Standard paragraph 28.39]
Disclosures about defined contribution plans
Disclosures about defined benefit plans
(a) a general description of the type of plan, including funding policy;
(b) a reconciliation of opening and closing balances of the defined benefit obligation showing separately benefits paid and all other changes;
(c) a reconciliation of the opening and closing balances of the fair value of plan assets and of the opening and closing balances of any reimbursement right recognised as an asset, showing separately, if applicable:
(i) contributions;
(ii) benefits paid; and
(iii) other changes in plan assets;
(d) the total cost relating to defined benefit plans for the period;
(e) for each major class of plan assets, which shall include, but is not limited to, equity instruments, debt instruments, property, and all other assets, the percentage or amount that each major class constitutes of the fair value of the total plan assets at the reporting date;
(f) the amounts included in the fair value of plan assets for:
(i) each class of the entity’s own financial instruments; and
(ii) any property occupied by, or other assets used by, the entity.
(g) the actual return on plan assets; and
(h) the principal actuarial assumptions used, including, when applicable:
(i) the discount rates;
(ii) the expected rates of return on any plan assets for the periods presented in the financial statements;
(iii) the expected rates of salary increases;
(iv) medical cost trend rates; and
(v) any other material actuarial assumptions used.
The reconciliations in (b) and (c) need not be presented for prior periods. A subsidiary that recognises and measures employee benefit expense on the basis of a contractual agreement or stated policy for charging the net defined benefit cost or based on their contributions payable for the period (see paragraph 41 of AASB 119), shall, in its separate financial statements, describe the contractual agreement or stated policy for charging the net defined benefit cost or the fact that there is no such policy, and the policy for determining the contributions to be paid by the entity and shall make the disclosures in (a)–(h) for the plan as a whole. The subsidiary can disclose this information by cross-reference to disclosures in another group entity’s financial statements if:
(i) that group entity’s financial statements separately identify and disclose the information required about the plan; and
(j) that group entity’s financial statements are available to users of the financial statements on the same terms as the financial statements of the entity and at the same time as, or earlier than, the financial statements of the entity.
[Based on IFRS for SMEs Standard paragraph 28.41]
Disclosures about termination benefits
Income Tax[27]
176 An entity shall disclose information that enables users of its financial statements to evaluate the nature and financial effect of the current and deferred tax consequences of recognised transactions and other events (including enactment or substantive enactment of tax rates and tax laws, such as Pillar Two legislation).[27A] [Based on IFRS for SMEs Standard paragraph 29.38]
177 An entity shall disclose separately the major components of tax expense (income). Such components of tax expense (income) may include:
(a) current tax expense (income);
(b) any adjustments recognised in the period for current tax of prior periods;
(c) the amount of deferred tax expense (income) relating to the origination and reversal of temporary differences;
(d) the amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes;
(e) the amount of the benefit arising from a previously unrecognised tax loss, tax credit or temporary difference of a prior period that is used to reduce tax expense;
(f) adjustments to deferred tax expense (income) arising from a change in the tax status of the entity or its shareholders;
(g) deferred tax expense (income) arising from the write-down, or reversal of a previous write-down, of a deferred tax asset in accordance with paragraph 56 of AASB 112 Income Taxes; and
(h) the amount of tax expense (income) relating to those changes in accounting policies and errors that are included in profit or loss in accordance with AASB 108, because they cannot be accounted for retrospectively.
[IFRS for SMEs Standard paragraph 29.39]
178 An entity shall disclose the following separately:
(a) the aggregate current and deferred tax relating to items that are recognised as items of other comprehensive income;
(b) the aggregate current and deferred tax relating to items that are charged or credited directly to equity;
(c) an explanation of the relationship between tax expense (income) and accounting profit in either or both of the following forms:
(i) a numerical reconciliation between tax expense (income) and product of accounting profit multiplied by the applicable tax rate(s), disclosing also the basis on which the applicable tax rate(s) is (are computed); or
(ii) a numerical reconciliation between the average effective tax rate and the applicable tax rate, disclosing also the basis on which the applicable tax rate is computed;
(d) an explanation of changes in the applicable tax rate(s) compared with the previous reporting period;
(e) for each type of temporary difference and for each type of unused tax losses and tax credits:
(i) the amount of deferred tax liabilities and deferred tax assets at the end of the reporting period; and
(ii) an analysis of the change in deferred tax liabilities and deferred tax assets during the period;
(f) the amount (and expiry date, if any) of deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax asset is recognised in the statement of financial position; and
(g) in the circumstances described in paragraph 52A of AASB 112, an explanation of the nature of the potential income tax consequences that would result from the payment of dividends to its shareholders.
[Based on IFRS for SMEs Standard paragraph 29.40]
International tax reform – Pillar Two model rules
178A An entity shall disclose that it has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes (see AASB 112 paragraph 4A).
178B An entity shall disclose separately its current tax expense (income) related to Pillar Two income taxes.
Foreign Currency Translation[28]
179 In paragraphs 181 and 182, references to ‘functional currency’ are, in the case of a group, to the functional currency of the parent. [IFRS for SMEs Standard paragraph 30.24]
180 An entity shall disclose the following:
(a) the amount of exchange differences recognised in profit or loss during the period, except for those arising on financial instruments measured at fair value through profit or loss in accordance with AASB 9; and
(b) the amount of exchange differences arising during the period and classified in a separate component of equity at the end of the period.
[IFRS for SMEs Standard paragraph 30.25]
Hyperinflation[29]
183 An entity to which AASB 129 Financial Reporting in Hyperinflationary Economies applies shall disclose the following:
(a) the fact that financial statements and other prior period data have been restated for changes in the general purchasing power of the functional currency;
(b) the identity and level of the price index at the reporting date and changes during the current reporting period and the previous reporting period; and
(c) the amount of gain or loss on monetary items.
[IFRS for SMEs Standard paragraph 31.15]
184 An entity that applies AASB 129 shall also disclose whether the financial statements are based on a historical cost approach or a current cost approach.
Events after the End of the Reporting Period[30]
Adjusting events after the end of the reporting period
Date of authorisation for issue
186 An entity shall disclose the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after issue, the entity shall disclose that fact. [IFRS for SMEs Standard paragraph 32.9]
Non-adjusting events after the end of the reporting period
187 An entity shall disclose the following for each category of non-adjusting event after the end of the reporting period:
(a) the nature of the event; and
(b) an estimate of its financial effect or a statement that such an estimate cannot be made.
[IFRS for SMEs Standard paragraph 32.10]
188 The following are examples of non-adjusting events after the end of the reporting period that would generally result in disclosure; the disclosures will reflect information that becomes known after the end of the reporting period but before the financial statements are authorised for issue:
(a) a major business combination or disposal of a major subsidiary;
(b) announcement of a plan to discontinue an operation;
(c) major purchases of assets, classifications of assets as held for sale in accordance with AASB 5, other disposals of assets, or expropriation of major assets by government;
(d) the destruction of a major production plant by a fire;
(e) announcement, or commencement of the implementation, of a major restructuring;
(f) issues or repurchases of an entity’s debt or equity instruments;
(g) abnormally large changes in asset prices or foreign exchange rates;
(h) changes in tax rates or tax laws enacted or announced that have a significant effect on current and deferred tax assets and liabilities;
(i) entering into significant commitments or contingent liabilities, for example, by issuing significant guarantees; and
(j) commencement of major litigation arising solely out of events that occurred after the end of the reporting period.
[Based on IFRS for SMEs Standard paragraph 32.11]
Related Party Disclosures[31]
Scope of this section
190 In considering each possible related party relationship, an entity shall assess the substance of the relationship and not merely the legal form. [IFRS for SMEs Standard paragraph 33.3]
191 In the context of this Standard, the following are not necessarily related parties:
(a) two entities simply because they have a director or other member of key management personnel in common;
(b) two venturers simply because they share joint control over a joint venture;
(c) any of the following simply by virtue of their normal dealings with an entity (even though they may affect the freedom of action of an entity or participate in its decision-making process):
(i) providers of finance;
(ii) trade unions;
(iii) public utilities; or
(iv) government departments and agencies; and
(d) a customer, supplier, franchisor, distributor or general agent with whom an entity transacts a significant volume of business, merely by virtue of the resulting economic dependence.
[IFRS for SMEs Standard paragraph 33.4]
Disclosure of parent-subsidiary relationships
Disclosure of key management personnel compensation
193 Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity. Compensation includes all employee benefits (as defined in AASB 119) including those in the form of share-based payment (see AASB 2 Share-based Payment). Employee benefits include all forms of consideration paid, payable or provided by the entity, or on behalf of the entity (for example, by its parent or by a shareholder), in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of goods or services provided to the entity. [IFRS for SMEs Standard paragraph 33.6]
Disclosure of related party transactions
197 A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. Examples of related party transactions that are common to entities within the scope of this Standard include, but are not limited to:
(a) transactions between an entity and its principal owner(s);
(b) transactions between an entity and another entity when both entities are under the common control of a single entity or person; and
(c) transactions in which an entity or person that controls the reporting entity incurs expenses directly that otherwise would have been borne by the reporting entity.
[IFRS for SMEs Standard paragraph 33.8]
(a) the amount of the transactions;
(b) the amount of outstanding balances and:
(i) their terms and conditions, including whether they are secured and the nature of the consideration to be provided in settlement; and
(ii) details of any guarantees given or received;
(c) provisions for uncollectable receivables related to the amount of outstanding balances; and
(d) the expense recognised during the period in respect of bad or doubtful debts due from related parties.
Such transactions could include purchases, sales or transfers of goods or services; leases; guarantees; and settlements by the entity on behalf of the related party or vice versa. [IFRS for SMEs Standard paragraph 33.9]
(a) entities with control, joint control or significant influence over the entity;
(b) entities over which the entity has control, joint control or significant influence;
(c) key management personnel of the entity or its parent (in the aggregate); and
(d) other related parties.
[IFRS for SMEs Standard paragraph 33.10]
200 An entity is exempt from the disclosure requirements of paragraph 198 in relation to:
(a) a state (a national, regional or local government) that has control, joint control or significant influence over the reporting entity; and
(b) another entity that is a related party because the same state has control, joint control or significant influence over both the reporting entity and the other entity.
However, the entity must still disclose a parent-subsidiary relationship as required by paragraph 192. [IFRS for SMEs Standard paragraph 33.11]
201 The following are examples of transactions that shall be disclosed if they are with a related party:
(a) purchases or sales of goods (finished or unfinished);
(b) purchases or sales of property and other assets;
(c) rendering or receiving of services;
(d) leases;
(e) transfers of research and development;
(f) transfers under licence agreements;
(g) transfers under finance arrangements (including loans and equity contributions in cash or in kind);
(h) provision of guarantees or collateral;
(i) settlement of liabilities on behalf of the entity or by the entity on behalf of another party;
(j) participation by a parent or subsidiary in a defined benefit plan that shares risks between group entities; and
(k) commitments to do something if a particular event occurs, or does not occur in the future, including executory contracts[32] (recognised or unrecognised).
[Based on IFRS for SMEs Standard paragraph 33.12]
202 An entity shall not state that related party transactions were made on terms equivalent to those that prevail in arm’s length transactions unless such terms can be substantiated. [IFRS for SMEs Standard paragraph 33.13]
Biological Assets[33]
Disclosures – fair value model
204 An entity shall disclose the following with respect to its biological assets measured at fair value:
(a) a description of each class of its biological assets.
(b) the methods and significant assumptions applied in determining the fair value of each category of agricultural produce at the point of harvest and each category of biological assets.
(c) a reconciliation of changes in the carrying amount of biological assets between the beginning and the end of the current period. The reconciliation shall include:
(i) the gain or loss arising from changes in fair value less costs to sell;
(ii) increases resulting from purchases;
(iii) decreases resulting from harvest;
(iv) increases resulting from business combinations;
(v) net exchange differences arising on the translation of financial statements into a different presentation currency and on the translation of a foreign operation into the presentation currency of the reporting entity; and
(vi) other changes.
This reconciliation need not be presented for prior periods.
[IFRS for SMEs Standard paragraph 34.7]
Disclosures – cost model
205 An entity shall disclose the following with respect to its biological assets measured using the cost model:
(a) a description of each class of its biological assets;
(b) an explanation of why fair value cannot be measured reliably;
(c) the depreciation method used;
(d) the useful lives or the depreciation rates used; and
(e) the gross carrying amount and the accumulated depreciation (aggregated with accumulated impairment losses) at the beginning and end of the period.
[Based on IFRS for SMEs Standard paragraph 34.10]
Transition to Australian Accounting Standards – Simplified Disclosures[34]
206 The following disclosures are provided where an entity applies the requirements of AASB 1 First-time Adoption of Australian Accounting Standards. If an entity applies the requirements of AASB 108 on first-time adoption, it shall provide the disclosures required by the section of Accounting Policies, Estimates and Errors. AASB 1053 Application of Tiers of Australian Accounting Standards sets out the requirements for which Standard may be applied upon first-time adoption.
207 If an entity is resuming the application of Tier 2 reporting requirements in accordance with AASB 1053 paragraph 19B(e), it shall provide the disclosures required by paragraphs 209(a) and (b), but need not provide the other disclosures set out in this section.
Explanation of transition to Australian Accounting Standards – Simplified Disclosures
(a) the reason it stopped applying Australian Accounting Standards or IFRSs;
(b) the reason it is resuming the application of Australian Accounting Standards or IFRSs; and
(c) whether it has applied AASB 1 or has applied Australian Accounting Standards – Simplified Disclosures retrospectively in accordance with AASB 108.
[Based on IFRS for SMEs Standard paragraph 35.12A]
Reconciliations
(a) a description of the nature of each change in accounting policy;
(b) reconciliations of its equity determined in accordance with its previous financial reporting framework to its equity determined in accordance with Australian Accounting Standards – Simplified Disclosures for both of the following dates:
(i) the date of transition to Australian Accounting Standards – Simplified Disclosures; and
(ii) the end of the latest period presented in the entity’s most recent annual financial statements determined in accordance with its previous financial reporting framework; and
(c) a reconciliation of the profit or loss determined in accordance with its previous financial reporting framework for the latest period in the entity’s most recent annual financial statements to its profit or loss determined in accordance with Australian Accounting Standards – Simplified Disclosures for the same period.
[IFRS for SMEs Standard paragraph 35.13]
(a) discloses in its first Australian-Accounting-Standards-Simplified-Disclosures financial statements:
(i) an explanation of information deficiencies and its strategy for rectifying those deficiencies; and
(ii) the Australian Accounting Standards that have not been complied with; and
(b) makes an explicit and unreserved statement of compliance with other Australian Accounting Standards for which there are no information deficiencies.
Specific Disclosures for Not-for-Profit Entities and Public Sector Entities
214 The following table identifies which paragraphs in this Standard are applicable only to not-for-profit private sector entities and public sector entities.
Para | Disclosure | Not-for-profit (NFP) entities | NFP public sector entities | Public sector entities (whether for-profit or NFP) | Govern-ment depart-ments | Govern-ment depart-ments and certain other public sector entities[35] | Entities in scope of AASB 1051[36] | Entities in scope of AASB 1055[37] |
124 | Inventories – basis on which loss of service potential is assessed | X |
|
|
|
|
|
|
151–152 | Leases with significantly below-market terms and conditions | X |
|
|
|
|
|
|
163 | Borrowing costs |
| X |
|
|
|
|
|
213 | Transition – difficulties in complying with requirements of certain Australian Accounting Standards |
| X |
|
|
|
|
|
215 | Contributions |
|
|
| X |
|
|
|
216–218 | Restructure of administrative arrangements |
|
|
| X |
|
|
|
219–220 | Administered items |
|
|
| X |
|
|
|
221 | Land under roads |
|
|
|
|
| X |
|
222–225 | Budgetary reporting |
|
|
|
|
|
| X |
226–237 | Income of NFP entities | X |
|
|
|
|
|
|
238–241 | Compliance with parliamentary appropriations and related authorities for expenditure |
|
|
|
| X |
|
|
242–243 | Service concession arrangements |
|
| X |
|
|
|
|
Contributions[38]
Restructure of administrative arrangements[39]
Administered items[40]
(a) administered income, showing separately each major class of income;
(b) administered expenses, showing separately each major class of expense;
(c) administered assets, showing separately each major class of asset; and
(d) administered liabilities, showing separately each major class of liability.
Land under roads[41]
Budgetary reporting[42]
222 Where an entity applies AASB 1055 Budgetary Reporting and its budgeted:
(a) statement of financial position;
(b) statement of profit or loss and other comprehensive income;
(c) statement of changes in equity; or
(d) statement of cash flows;
reflecting controlled items is presented to parliament and is separately identified as relating to that entity, the entity shall disclose for the reporting period:
(e) that original budgeted financial statement presented to parliament, presented and classified on a basis that is consistent with the presentation and classification adopted in the corresponding financial statement prepared in accordance with Australian Accounting Standards; and
(f) explanations of major variances between the actual amounts presented in the financial statements and the corresponding original budget amounts.
223 Where an entity within the General Government Sector (GGS)’s budgeted financial information reflecting major classes of administered income and expenses, or major classes of administered assets and liabilities, is presented to parliament and is separately identified as relating to that entity, the entity shall disclose for the reporting period:
(a) that original budgeted financial information presented to parliament, presented and classified on a basis that is consistent with the presentation and classification adopted for the corresponding information about administered items disclosed in accordance with AASB 1050 Administered Items; and
(b) explanations of major variances between the actual amounts disclosed in the financial statements in accordance with AASB 1050 and the corresponding original budget amounts.
224 Comparative budgetary information in respect of the previous period need not be disclosed.
Income of not-for-profit entities[43]
227 An entity shall consider the level of detail necessary to satisfy the disclosure objective and how much emphasis to place on each of the various requirements. An entity shall aggregate or disaggregate disclosures so that useful information is not obscured by either the inclusion of a large amount of insignificant detail or the aggregation of items that have substantially different characteristics.
228 An entity need not disclose information in accordance with paragraphs 226–241 if it has provided the information in accordance with other sections in this Standard.
(a) grants, bequests and donations of cash, other financial assets and goods;
(b) recognised volunteer services; and
(c) for government departments and other public sector entities, appropriation amounts recognised as income, by class of appropriation.
Non-contractual income arising from statutory requirements
230 An entity shall disclose income arising from statutory requirements (such as taxes, rates and fines) recognised during the period, disaggregated into categories that reflect how the nature and amount of income (and the resultant cash flows) are affected by economic factors.
231 To meet the objective in paragraph 226, an entity shall consider disclosing information about assets and liabilities recognised at the reporting date in accordance with AASB 1058 Income of Not-for-Profit Entities, including the amounts of:
(a) receivables that are not a financial asset as defined in AASB 132 (eg income tax receivable from a taxpayer), and:
(i) interest income recognised in relation to such receivables during the period; and
(ii) impairment losses recognised in relation to such receivables during the period; and
(b) financial liabilities relating to prepaid taxes or rates for which the taxable event has yet to occur, and the future period(s) to which those taxes or rates relate.
232 Other information that may be appropriate for an entity to disclose includes, for each class of taxation income that the entity cannot measure reliably during the period in which the taxable event occurs (see paragraphs B28–B31 of AASB 1058):
(a) information about the nature of the tax;
(b) the reason(s) why that income cannot be measured reliably; and
(c) when that uncertainty might be resolved.
Transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity
233 An entity shall disclose the opening and closing balances of financial assets arising from transfers to enable an entity to acquire or construct recognisable non-financial assets to be controlled by the entity and the associated liabilities arising from such transfers, if not otherwise separately presented or disclosed. An entity shall also disclose income recognised in the reporting period arising from the reduction of an associated liability.
234 An entity shall disclose information about its obligations under such transfers, including a description of when the entity typically satisfies its obligations (for example, as the asset is constructed, upon completion of construction or when the asset is acquired).
235 An entity shall disclose the judgements, and changes in the judgements, made in applying AASB 1058 that significantly affect the determination of the amount and timing of income arising from transfers to enable an entity to acquire or construct a recognisable non-financial asset to be controlled by the entity. In particular, an entity shall explain the judgements, and changes in the judgements, made in determining the timing of satisfaction of obligations (see paragraphs 236 and 237).
236 For obligations that an entity satisfies over time, an entity shall disclose the methods used to recognise income (for example, a description of the output methods or input methods used and how those methods are applied).
Compliance with parliamentary appropriations and other related authorities for expenditure
(a) a summary of the recurrent, capital or other major categories of amounts authorised for expenditure (including parliamentary appropriations), disclosing separately:
(i) the original amounts appropriated; and
(ii) the total of any supplementary amounts appropriated and amounts authorised other than by way of appropriation (eg by the Treasurer, other Minister or other legislative authority);
(b) the expenditures in respect of each of the items disclosed in (a) above; and
(c) the reasons for any material variances between the amounts appropriated or otherwise authorised and the resulting associated expenditures, and any financial consequences for the entity of unauthorised expenditure.
240 For the purposes of resource allocation decisions, including assessments of accountability, AASB 1058 requires that users of financial statements of government departments and other public sector entities that obtain part or all of their spending authority for the period from a parliamentary appropriation be provided with information about the amounts appropriated or otherwise authorised for the entity’s use, and whether the entity’s expenditures were as authorised. This information may be based on acquittal processes applied by an entity. When spending limits imposed by parliamentary appropriation or other authorisation have not been complied with, information regarding the amount of, and reasons for, the non-compliance is relevant for assessing the performance of management, the likely consequences of non-compliance, and the ability of the entity to continue to provide services at a similar or different level in the future.
241 Broad summaries of the major categories of appropriations and associated expenditures, rather than detailed reporting of appropriations for each activity or output, is sufficient for most users of such an entity’s financial statements. Determining the level of detail and the structure of the summarised information is a matter of judgement. To develop effective disclosures, entities also subject to AASB 1055 might consider the variance disclosure requirements in that Standard at the same time.
Service concession arrangements: grantors that are public sector entities[44]
(a) a description of the arrangements;
(b) significant terms of the arrangements that may affect the amount, timing and uncertainty of future cash flows (eg the period of the arrangement, re-pricing dates and the basis upon which re-pricing or renegotiation is determined);
(c) the nature and extent (eg quantity, time period, or amount, as appropriate) of:
(i) rights to receive specified services from the operator;
(ii) the carrying amount of service concession assets as at the end of the reporting period, including separate disclosure for existing assets of the grantor reclassified as service concession assets during the reporting period;
(iii) rights to receive specified assets at the end of an arrangement;
(iv) renewal and termination options;
(v) other rights and obligations (eg major overhaul of service concession assets); and
(vi) obligations to provide the operator with access to service concession assets or other revenue-generating assets; and
(d) changes in arrangements occurring during the reporting period.
244 [Repealed]
Appendix A
Defined terms
This appendix is an integral part of the Standard.
The following terms are used in this Standard with the meanings specified. Except to the extent specifically addressed in this Standard, the definitions in other Australian Accounting Standards also apply.
Presentation of the financial statements
Accounting policies are defined in paragraph 5 of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, and the term is used in this Standard with the same meaning.
General purpose financial statements (referred to as ‘financial statements’) are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs.
Impracticable Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so.
International Financial Reporting Standards (IFRSs) are Standards and Interpretations issued by the International Accounting Standards Board (IASB). They comprise:
(a) International Financial Reporting Standards;
(b) International Accounting Standards;
(c) IFRIC Interpretations; and
(d) SIC Interpretations.[45]
Material:
(c) dissimilar items, transactions or other events are inappropriately aggregated;
(d) similar items, transactions or other events are inappropriately disaggregated; and
Notes contain information in addition to that presented in the statement of financial position, statement(s) of profit or loss and other comprehensive income, separate income statement (if presented), statement of changes in equity and statement of cash flows. Notes provide narrative descriptions or disaggregations of items presented in those statements and information about items that do not qualify for recognition in those statements.
Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by other Australian Accounting Standards.
The components of other comprehensive income include:
(a) changes in revaluation surplus (see AASB 116 Property, Plant and Equipment and AASB 138 Intangible Assets);
(b) remeasurements of defined benefit plans (see AASB 119 Employee Benefits);
(c) gains and losses arising from translating the financial statements of a foreign operation (see AASB 121 The Effects of Changes in Foreign Exchange Rates);
(d) gains and losses from investments in equity instruments designated at fair value through other comprehensive income in accordance with paragraph 5.7.5 of AASB 9 Financial Instruments;
(da) gains and losses on financial assets measured at fair value through other comprehensive income in accordance with paragraph 4.1.2A of AASB 9;
(e) the effective portion of gains and losses on hedging instruments in a cash flow hedge and the gains and losses on hedging instruments that hedge investments in equity instruments measured at fair value through other comprehensive income in accordance with paragraph 5.7.5 of AASB 9 (see Chapter 6 of AASB 9);
(f) for particular liabilities designated as at fair value through profit or loss, the amount of the change in fair value that is attributable to changes in the liability’s credit risk (see paragraph 5.7.7 of AASB 9);
(g) changes in the value of the time value of options when separating the intrinsic value and time value of an option contract and designating as the hedging instrument only the changes in the intrinsic value (see Chapter 6 of AASB 9);
(h) changes in the value of the forward elements of forward contracts when separating the forward element and spot element of a forward contract and designating as the hedging instrument only the changes in the spot element, and changes in the value of the foreign currency basis spread of a financial instrument when excluding it from the designation of that financial instrument as the hedging instrument (see Chapter 6 of AASB 9);
(i) insurance finance income and expenses from contracts issued within the scope of AASB 17 Insurance Contracts excluded from profit or loss when total insurance finance income or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation applying paragraph 88(b) of AASB 17, or by an amount that eliminates accounting mismatches with the finance income or expenses arising on the underlying items, applying paragraph 89(b) of AASB 17; and
(j) finance income and expenses from reinsurance contracts held excluded from profit or loss when total reinsurance finance income or expenses is disaggregated to include in profit or loss an amount determined by a systematic allocation applying paragraph 88(b) of AASB 17.
Owners are holders of instruments classified as equity.
Profit or loss is the total of income less expenses, excluding the components of other comprehensive income.
Reclassification adjustments are amounts reclassified to profit or loss in the current period that were recognised in other comprehensive income in the current or previous periods.
Total comprehensive income is the change in equity during a period resulting from transactions and other events, other than those changes resulting from transactions with owners in their capacity as owners.
Total comprehensive income comprises all components of ‘profit or loss’ and of ‘other comprehensive income’.
Statement of Cash Flows
Cash comprises cash on hand and demand deposits.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash flows are inflows and outflows of cash and cash equivalents.
Operating activities are the principal revenue-producing activities of the entity and other activities that are not investing or financing activities.
Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents.
Financing activities are activities that result in changes in the size and composition of the contributed equity and borrowings of the entity.
Financial instruments
Loans payable are financial liabilities, other than short-term trade payables on normal credit terms.
Related party disclosures
A related party is a person or entity that is related to the entity that is preparing its financial statements (the reporting entity):
(a) a person or a close member of that person’s family is related to a reporting entity if that person:
(i) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity;
(ii) has control or joint control over the reporting entity; or
(iii) has significant influence over the reporting entity.
(b) an entity is related to a reporting entity if any of the following conditions applies:
(i) the entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).
(ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
(iii) both entities are joint ventures of the same third entity.
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity.
(v) the entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity.
(vi) the entity is controlled or jointly controlled by a person identified in (a).
(vii) the entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity.
(viii) a person identified in (a)(ii) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.
Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity and include:
(a) that person’s children and spouse or domestic partner;
(b) children of that person’s spouse or domestic partner; and
(c) dependants of that person or that person’s spouse or domestic partner.
Compensation includes all employee benefits (as defined in AASB 119 Employee Benefits) including employee benefits to which AASB 2 Share-based Payment applies. Employee benefits are all forms of consideration paid, payable or provided by the entity, or on behalf of the entity, in exchange for services rendered to the entity. It also includes such consideration paid on behalf of a parent of the entity in respect of the entity. Compensation includes:
(a) short-term employee benefits, such as wages, salaries and social security contributions, paid annual leave and paid sick leave, profit-sharing and bonuses (if payable within twelve months of the end of the period) and non-monetary benefits (such as medical care, housing, cars and free or subsidised goods or services) for current employees;
(b) post-employment benefits such as pensions, other retirement benefits, post-employment life insurance and post-employment medical care;
(c) other long-term employee benefits, including long-service leave or sabbatical leave, jubilee or other long-service benefits, long-term disability benefits and, if they are not payable wholly within twelve months after the end of the period, profit-sharing, bonuses and deferred compensation;
(d) termination benefits; and
(e) share-based payment.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity.
Government refers to government, government agencies and similar bodies whether local, national or international.
A government-related entity is an entity that is controlled, jointly controlled or significantly influenced by a government.
The terms ‘control’ and ‘investment entity’, ‘joint control’ and ‘significant influence’ are defined in AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements and AASB 128 Investments in Associates and Joint Ventures respectively and are used in this Standard with the meanings specified in those Australian Accounting Standards.
Appendix B
Effective date
This appendix is an integral part of the Standard.
B1 An entity shall apply this Standard for annual reporting periods beginning on or after 1 July 2021. Earlier application is permitted. If an entity applies this Standard earlier:
(a) it shall disclose that fact; and
(b) if the entity is a for-profit private sector entity – it may elect to apply the short-term exemptions in AASB 1053 Application of Tiers of Australian Accounting Standards Appendix E, where applicable; or
(c) if the entity is a not-for-profit entity – notwithstanding paragraph 20, it may elect not to present comparative information in the notes to the financial statements if the entity did not disclose the comparable information in its most recent previous general purpose financial statements.
Appendix C
Amendments to other Standards
This appendix sets out the amendments to other Australian Accounting Standards that are a consequence of the AASB issuing this Standard.
[Deleted by the AASB – the amendments have been incorporated into the text of the relevant pronouncements.]
Implementation guidance
Disclosure and presentation requirements in other Standards and Interpretations
This implementation guidance accompanies, but is not part of, AASB 1060.
IG1 The table below has been provided for ease of reference, and lists the Standards and specific disclosure paragraphs that do not apply to an entity that is applying AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities as well as specific presentation paragraphs or associated guidance paragraphs that still apply to the entity.
AASB Standard | Paragraphs superseded by this Standard | Paragraphs that have not been superseded by this Standard and represent presentation requirements or associated guidance |
AASB 1 First-time Adoption of Australian Accounting Standards | Paragraphs Aus3.2 and 20–33 The text ‘and present’ in paragraph 6. | none |
AASB 2 Share-based Payment | Paragraphs 44–52 | none |
AASB 3 Business Combinations | Paragraphs 59–63 and B64–B67 | none |
AASB 5 Non-current Assets Held for Sale and Discontinued Operations | Paragraphs 30, 33, 35, 36A, 41 and 42 | Paragraphs 31, 32, 33A, 34, 36, and 37–40 |
AASB 6 Exploration for and Evaluation of Mineral Resources | Paragraphs 23–25 | Paragraphs 15–17 |
AASB 7 Financial Instruments: Disclosures | Compliance with this Standard is not required, however it may be referred to for guidance | n/a |
AASB 8 Operating Segments | Paragraphs 5–34, unless elect to disclose segment information | n/a |
AASB 12 Disclosure of Interests in Other Entities | Compliance with this Standard is not required, however, it may be referred to for guidance. | n/a |
AASB 13 Fair Value Measurement | Paragraphs 91–99 | none |
AASB 15 Revenue from Contracts with Customers | Paragraphs 110–129 and B87–B89 | Paragraphs 105–109 |
AASB 16 Leases | Paragraphs 51–60, 89–92 and B48–B52 | Paragraphs 47–50, 88 |
AASB 101 Presentation of Financial Statements | Compliance with this Standard is not required, however it may be referred to for guidance. | n/a |
AASB 102 Inventories | Paragraphs 36–39 | none |
AASB 107 Statement of Cash Flows | Compliance with this Standard is not required, however it may be referred to for guidance. | n/a |
AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors | Paragraphs 28–31, 39–40 and 49 | none |
AASB 110 Events after the Reporting Period | Paragraphs 13, 16 and 17–22 | none |
AASB 112 Income Taxes | Paragraphs 79–88D | Paragraphs 71–78 |
AASB 116 Property, Plant and Equipment | Paragraphs 73–79 | none |
AASB 119 Employee Benefits | Paragraphs 25, 33(b), 34(b), 42, 53, 54, 135–152, 158, 171 | Paragraphs 131–134 |
AASB 120 Accounting for Government Grants and Disclosure of Government Assistance | Paragraph 39 | Paragraphs 24–31 |
AASB 121 The Effects of Changes in Foreign Exchange Rates | Paragraphs 51–57 | none |
AASB 123 Borrowing Costs | Paragraphs 26 and Aus26.1 | none |
AASB 124 Related Party Disclosures | Compliance with this Standard is not required, however it may be referred to for guidance. | n/a |
AASB 127 Separate Financial Statements | Paragraphs 15–17 | none |
AASB 129 Financial Reporting in Hyperinflationary Economies | Paragraphs 39 and 40 | none |
AASB 132 Financial Instruments: Presentation |
| AASB 132 continues to apply |
AASB 133 Earnings per Share | Paragraphs 3–73A and Appendix A, unless elect to disclose earnings per share. | n/a |
AASB 136 Impairment of Assets | Paragraphs 126–137 | none |
AASB 137 Provisions, Contingent Liabilities and Contingent Assets | Paragraphs 84–92 and last sentence of paragraph 75 | none |
AASB 138 Intangible Assets | Paragraphs 118–128 | none |
AASB 140 Investment Property | Paragraphs 74–79 | none |
AASB 141 Agriculture | Paragraphs 40–57 | none |
AASB 1004 Contributions | Paragraph 43A, 57–59 | none |
AASB 1050 Administered Items | Paragraphs 7, 8 and 22 | Paragraphs 9–21, and 23–25 |
AASB 1051 Land Under Roads | Paragraphs 11 and 12 | none |
AASB 1052 Disaggregated Disclosures | Paragraphs 15–21 | none |
AASB 1054 Australian Additional Disclosures | Paragraphs 7–16 | none |
AASB 1055 Budgetary Reporting | Paragraphs 6–8 | Paragraphs 9–15 |
AASB 1058 Income of Not-for-Profit Entities | Paragraphs 23–41 | none |
AASB 1059 Service Concession Arrangements: Grantors | Paragraphs 28, 29, B79 and B80 | none |
IG2 The table below lists the specific disclosure paragraphs in Interpretations that do not apply to an entity that is applying AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities as well as specific presentation paragraphs or associated guidance paragraphs that still apply to the entity.
AASB Interpretations | Paragraphs superseded by this Standard | Paragraphs that have not been superseded by this Standard and represent presentation requirements or guidance |
Interpretation 2 Members’ Shares in Co-operative Entities and Similar Instruments | Paragraph 13 | none |
Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds | Paragraphs 11–13 | none |
Interpretation 17 Distributions of Non-cash Assets to Owners | Paragraphs 16–17 | Paragraph 15 |
Interpretation 23 Uncertainty over Income Tax Treatments | Paragraphs A4 and A5 | none |
Interpretation 129 Service Concession Arrangements: Disclosures | Paragraphs 6–7 | none |
Interpretation 1052 Tax Consolidation Accounting | Paragraphs 16, 59 and 60 | none |
Compilation details
Accounting Standard AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (as amended)
Compilation details are not part of AASB 1060
This compiled Standard applies to annual periods beginning on or after 1 January 2024 but before 1 January 2025. It takes into account amendments up to and including 14 September 2023 and was prepared on 18 December 2023 by the staff of the Australian Accounting Standards Board (AASB).
This compilation is not a separate Accounting Standard made by the AASB. Instead, it is a representation of AASB 1060 (March 2020) as amended by other Accounting Standards, which are listed in the table below.
Table of Standards
Standard | Date made | FRL identifier | Commence-ment date | Effective date | Application, saving or transitional provisions |
AASB 1060 | 6 Mar 2020 | F2020L00288 | 30 Jun 2021 | (beginning) 1 Jul 2021 | see (a) below |
AASB 2020-7 | 10 Aug 2020 | F2020L01050 | 30 Jun 2021 | (beginning) 1 Jul 2021 | see (b) below |
AASB 2020-9 | 7 Dec 2020 | F2020L01646 | 30 Jun 2021 | (beginning) 1 Jul 2021 | see (a) below |
AASB 2021-1 | 29 Mar 2021 | F2021L00469 | 30 Jun 2021 | (beginning) 1 Jul 2021 | see (c) below |
AASB 2021-6 | 8 Dec 2021 | F2021L01793 | 31 Dec 2022 | (beginning) 1 Jan 2023 | see (d) below |
AASB 2021-7 | 20 Dec 2021 | F2021L01883 | 31 Dec 2021 | (beginning) 1 Jan 2022 | see (e) below |
AASB 2023-3 | 22 Jun 2023 | F2023L00951 | 31 Dec 2023 | (beginning) 1 Jan 2024 | see (f) below |
AASB 2023-4 | 14 Sep 2023 | F2023L01301 | 29 Sep 2023 | (beginning) 1 Jan 2023 that end on or after 30 Sep 2023 | see (g) below |
AASB 2023-5 | 9 Oct 2023 | F2023L01377 | 31 Dec 2024 | (beginning) 1 Jan 2025 | not compiled* |
* The amendments made by this Standard are not included in this compilation, which presents the principal Standard as applicable to annual periods beginning on or after 1 January 2024 but before 1 January 2025.
(a) Entities may elect to apply this Standard to annual periods beginning before 1 July 2021.
(b) Entities are required to apply this Standard to annual periods beginning before 1 July 2021 if the entity is applying AASB 1060 and AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions to the period.
(c) Entities may elect to apply this Standard to annual periods beginning before 1 July 2021, provided that AASB 1060 is also applied to the same period.
(d) Entities may elect to apply this Standard to annual periods beginning before 1 January 2023.
(e) Entities may elect to apply this Standard to annual periods beginning before 1 January 2022.
(f) Entities may elect to apply this Standard to annual periods beginning before 1 January 2024.
(g) Entities may elect to apply this Standard to annual periods ending before 30 September 2023.
Table of amendments to Standard
Paragraph affected | How affected | By … [paragraph] |
25 | amended | AASB 2021-6 [7] |
40 | amended | AASB 2023-3 [5] |
41A | added | AASB 2023-3 [5] |
47A | added | AASB 2023-3 [5] |
93 | amended | AASB 2021-6 [7] |
95 (and heading) | amended | AASB 2021-6 [7] |
96 | amended | AASB 2021-6 [7] |
107A | added | AASB 2020-9 [5] |
112 | amended | AASB 2021-6 [7] |
123 | amended | AASB 2021-6 [7] |
125 | amended | AASB 2021-6 [7] |
129 | amended | AASB 2021-6 [7] |
130 | amended | AASB 2020-9 [6] |
146A | added amended | AASB 2020-7 [6] AASB 2020-9 [6] |
160 | amended | AASB 2021-6 [7] |
163 | amended | AASB 2021-6 [7] |
176 | amended | AASB 2023-4 [7] |
178A-178B (and heading) | added | AASB 2023-4 [7] |
214 | amended | AASB 2020-9 [7] |
221 | amended | AASB 2021-6 [7] |
244 | repealed | Legislation Act 2003, s. 48D |
Appendix A | amended | AASB 2021-6 [7] |
B1 | amended | AASB 2021-1 [8] |
Appendix C | amended deleted | AASB 2020-9 [8] AASB 2021-7 [51] |
Table of amendments to guidance
Paragraph affected | How affected | By … [paragraph] |
IG1 | amended amended | AASB 2020-9 [9] AASB 2023-4 [7] |
IG2 | amended | AASB 2020-9 [10] |
Basis for Conclusions
This Basis for Conclusions accompanies, but is not part of, AASB 1060.
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in AASB 1060. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
BC2 This Standard has been developed in conjunction with AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities to:
(a) provide Tier 2 reporting requirements for those for-profit entities that will be prohibited from preparing special purpose financial statements (SPFS) when AASB 2020-2 becomes operative, that appropriately balance the needs of users with the costs of moving from SPFS to Tier 2;
(b) reduce the reporting burden of for-profit and not-for-profit (NFP) entities using the current Tier 2 reporting requirements for preparing General Purpose Financial Statements (GPFS) as a result of the AASB’s post-implementation review of the current Reduced Disclosure Requirements (RDR) framework; and
(c) maximise the use of relevant International Financial Reporting Standards (IFRS) based materials by more closely reflecting the IFRS for SMEs disclosures in this Standard and support the International Accounting Standards Board (IASB) with its project to develop a reduced disclosure IFRS standard that combines full IFRS recognition and measurement (R&M) requirements with IFRS for SMEs disclosures[46].
BC3 Entities that are required to prepare financial statements in accordance with Australian Accounting Standards (AAS) have a choice of two disclosure frameworks[47]:
(a) Tier 1 reporting requirements which apply to the GPFS of for-profit private sector entities that have public accountability and are required by legislation to prepare financial statements that comply with either Australian Accounting Standards or accounting standards and the Australian Government and State, Territory and Local Governments; and
(b) Tier 2 reporting requirements which apply to the GPFS of for-profit private sector entities that do not have public accountability, not-for-profit private sector entities and public sector entities, whether for-profit or not-for-profit, other than the Australian Government and State, Territory and Local Governments.
BC4 Before the adoption of AASB 2020-2 entities that had self-assessed to be a non-reporting entity, could also elect to prepare SPFS. However, in March 2020 the Board decided to remove this ability based on the feedback received on the March 2018 Consultation Paper ITC 39 Applying the IASB’s Revised Conceptual Framework and Solving the Reporting Entity and Special Purpose Financial Statement Problems and the subsequent ED 297 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities.
BC5 AASB 2020-2 removes the ability to prepare SPFS for the following for-profit entities:
(a) for-profit private sector entities that are required by legislation to comply with either Australian Accounting Standards or accounting standards;
(b) other for-profit private sector entities that are required only by their constituting document or another document to comply with Australian Accounting Standards, provided that the relevant document was created or amended on or after 1 July 2021; and
(c) other for-profit entities that elect to prepare GPFS and apply the revised Conceptual Framework for Financial Reporting (Conceptual Framework) and the consequential amendments to other pronouncements set out in Accounting Standards AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework and AASB 2020-2 Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Sector Entities.
BC6 To help reduce the cost burden for for-profit entities that will be affected by the removal of SPFS, and noting the comments received on ITC 39, the Board agreed to make further reductions to the disclosures that apply to Tier 2 entities compared to the GPFS Tier 2 RDR framework.
BC7 The Board also noted the strong preference expressed by respondents to ITC 39 for a framework that includes full R&M requirements in AAS on the grounds that it would enhance the comparability, consistency and transparency of the financial statements. Feedback from targeted outreach emphasised that users agreed the usefulness of information within financial statements for decision making is adversely affected where entities have not consistently applied R&M requirements. Further discussion of the Board’s consideration on this matter is available in AASB 2020-2 paragraphs BC108−BC114.
BC8 While some respondents had called for more than one Tier 2 GPFS framework for for-profit entities, the Board noted that given the small number of for-profit entities required to publicly lodge financial statements with ASIC, which will be even less following the increase of the reporting thresholds for large proprietary companies (April 2019), the development and maintenance of more than two GPFS disclosure frameworks was not warranted. The Board further emphasised that entities without a statutory requirement to comply with AAS, such as those below the now doubled large proprietary thresholds, would be able to continue to tailor their financial statements to the needs of their specific users and therefore additional Tiers were not required. Further discussion of the Board’s consideration on this matter is available in AASB 2020-2 paragraphs BC99−BC107.
BC9 However, separate targeted consultations will be undertaken in relation to the implementation of the IASB’s revised Conceptual Framework by not-for-profit (NFP) private and public sector entities which may result in more than two tiers for those sectors, as the characteristics of those sectors are quite different. For these entities, this Standard is therefore an interim measure until more progress is made through further consultation and outreach.
BC10 After having considered the various options outlined below and the feedback received on ED 295 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities, the Board is of the view that this Standard addresses stakeholders’ concerns and provides an appropriate balance between user needs and preparer costs.
BC11 In developing AASB 1060, the Board considered the following options:
(a) retain the current Tier 2 disclosure requirements (RDR framework);
(b) adopt the alternative proposed in ITC 39 (SDR framework – see paragraph BC13);
(c) revisit the proposals in ED 277 Reduced Disclosures Requirements for Tier 2 Entities; or
(d) develop a new disclosure Standard based on the IFRS for SMEs Standard.
RDR and SDR frameworks – feedback from ITC 39
BC12 In ITC 39, the Board proposed to replace the current RDR framework with a revised disclosure framework and proposed two alternatives for Tier 2 (See Specific Matter for Comment 12 of ITC 39). Alternative 1 was the existing Tier 2 RDR under AASB 1053 Application of Tiers of Australian Accounting Standards which requires compliance with the full R&M requirements of AAS (as amended for NFP specific issues) and with minimum disclosures specified in each Standard.
BC14 After issuing ITC 39, the Board held targeted outreach with key stakeholders, including State, Territory and National regulators, audit offices, accounting firms, the Australian Securities Exchange (ASX), the Australian Taxation Office (ATO), the Australian Securities and Investments Commission (ASIC), credit rating agencies and professional bodies. The ITC 39 proposals were also presented at various forums, workshops, roundtables and discussion groups.
BC15 The Board received feedback on its proposals in ITC 39 through 33 formal comment letters from professional service firms, regulators, professional bodies, academics, preparers, users of financial statements and other respondents. Furthermore, feedback was sought via targeted user and preparer surveys in quarter 3 of 2018, which received a total of 37 user and 49 preparer responses[48]. The surveys were focussed on the specific matters for comment in ITC 39, and were used to get a better understanding of which of the Tier 2 GPFS frameworks proposed in ITC 39 users preferred (and why), as well as what transitional relief would be helpful to preparers.
BC16 The feedback on the proposed SDR framework was that the SDR had too many disclosures in some ways but fell short in many other ways. For example, the feedback received from roundtables, surveys and submissions on ITC 39 was that whilst the disclosures in SDR are important, requiring full disclosure of those nine Standards (as explained in paragraph BC13) was too much. Most participants further suggested that SDR might not be appropriate for all industry sectors and is missing some critical disclosures to help predict the viability of an entity such as liquidity, contingent liabilities, subsequent events and commitment disclosures.
BC17 At the same time, respondents noted that refining the principles used in determining the level of disclosures required for Tier 2 entities to achieve an appropriate balance between the benefits of financial information to users and the costs to preparers of providing that information is crucial. The feedback from the roundtables, surveys and submissions on ITC 39 indicated that RDR has too many disclosure requirements.
Revisiting the proposals in ED 277
BC18 The RDR disclosure requirements in Australia and New Zealand are essentially the same and are based on an approach developed by the Board in 2010. That approach draws on the disclosure requirements in the IFRS for SMEs Standard when Tier 2 R&M requirements are the same as those under the IFRS for SMEs Standard; and applies the ‘user needs’ and ‘cost-benefit’ principles applied by the IASB in developing its IFRS for SMEs Standard when full R&M requirements are not the same as those available under the IFRS for SMEs Standard. A top-down approach is used which starts with the full IFRS disclosures and then identifies those that can be removed. The Board noted that there could be a tendency to retain disclosures in circumstances where a direct comparison is not possible.
BC19 A post implementation review of the RDR framework was carried out by the Board which identified that the RDR disclosure requirements had not delivered the expected outcome and that take up of the RDR framework by entities was consequently low[49]. In response to the findings of the post implementation review, the Board issued ED 277 in January 2017 as a joint project with the New Zealand Accounting Standards Board (NZASB).
BC20 ED 277 proposed adopting an RDR decision-making framework, together with accompanying operational guidance. The framework was based on Key Disclosure Areas (KDAs) which were meant to result in information that meets user needs. Judgement was required when applying this framework, and the overarching principles of user needs and cost-benefit were considered when determining the disclosures that Tier 2 entities should make.
BC21 The approach taken in the proposed Tier 2 framework in ED 277 was to include an Australian Appendix in each AAS that identifies the disclosures that Tier 2 entities are required to provide, thereby addressing concerns by those that find the shading used to identify disclosures that can be omitted confusing. However, while ED 277 was based on clear disclosure principles, the cost-benefit analysis was difficult to apply in the context of disclosures and the top-down approach resulted in too many disclosures being retained, as removal was difficult to justify with the KDAs.
BC22 Feedback from Australian stakeholders confirmed that ED 277 still resulted in too many disclosures. While the Board had intended to conduct further outreach and consultation on the proposals in ED 277, any further work was put on hold following the issue of the revised Conceptual Framework by the IASB in March 2018 and the decision by the Board to reform the Australian Financial Reporting Framework and propose removing the ability for entities to prepare SPFS when required to comply with AAS by legislation or otherwise.
Issue of ED 295 – New disclosure Standard based on the disclosures in IFRS for SMEs Standard
BC23 In weighing up the shortfalls of RDR, the other proposed Tier 2 options and the disclosure principles applied by the IASB while developing the IFRS for SMEs Standard, the Board decided in February 2019 to develop a new Tier 2 Standard based on the disclosures in the IFRS for SMEs Standard which would be available for GPFS that are publicly lodged or are required to comply with AAS, but do not relate to entities that are publicly accountable.
BC24 Using the IFRS for SMEs Standard as the base maximises the use of relevant IFRS-based materials. The Board further noted that the IASB had added a research project on Subsidiaries that are SMEs to their agenda in March 2019, which was moved to the standard-setting programme in January 2020. Consistent with the policy of adopting Standards issued by the IASB for application by Australian entities, AASB 1060 may ultimately be replaced with the Standard developed by the IASB. This would not only remove the need for the Board to maintain a separate Tier 2 Standard, but also provide comparability and consistency for subsidiary reporting globally. However, this is a longer-term project and the Board needs to have a revised disclosure framework in place in time for the removal of SPFS from 1 July 2021. While the Board could therefore not wait for the IASB to complete their project, the Board will monitor the progress of the IASB’s project closely.
BC25 The disclosures that are relevant to Tier 2 entities are set out in a separate Standard, being AASB 1060, which was exposed for public comment in August 2019 as ED 295, together with ED 297. The comment period for both EDs ended on 30 November 2019.
BC26 Extensive outreach was conducted on the proposals, including roundtables in Melbourne, Sydney, Brisbane, Perth and Adelaide, attended by 127 stakeholders, a webinar with 162 participants, as well as separate consultations with the AASB’s User Advisory Committee, credit analysts and private equity investors.
BC27 The Board received 25 formal submissions on ED 295 from stakeholders representing professional services firms, regulators, professional bodies, academics, preparers, public sector audit offices, software providers and others.
BC28 The following section details the matter considered by the Board in developing the proposals and this Standard, including the Board’s decisions on how to address stakeholders’ feedback as part of the exposure process.
BC29 The Board identified the following benefits arising from the adoption of the new Tier 2 Standard over the other options considered:
(a) The IASB has developed the disclosures in the IFRS for SMEs Standard with for-profit private sector entities that are not publicly accountable entities in mind and considers that they are adequate to meet the needs of the relevant users[50].
(b) A comparison of the new disclosures to the disclosures that would be required under the SDR and RDR has confirmed that adoption of the new Tier 2 Standard addresses stakeholders concerns by resulting in a level of disclosures that lies in between the current RDR and the proposed SDR requirements.
(c) This option is based on a bottom-up approach in developing disclosures and avoids needing to identify specific full IFRS disclosures that need to be retained and those that can be excluded. It is a more rigorous and targeted way of reducing disclosures to an appropriate level (based on previous experiences with the RDR approach, as it involves needing to justify additional disclosures rather than the removal of disclosures from full IFRS).
(d) This option introduces more flexibility as it allows drafting disclosures to suit the circumstances and not be restricted by existing full IFRS disclosures.
(e) Setting out the disclosures in a separate Standard will make it easier for stakeholders, as it avoids having to identify applicable disclosures via shading in between the full disclosures. The Board noted that this will also improve readability where parts of sentences were shaded in the RDR (ie excluded).
BC30 However, the Board noted that adopting this Standard will result in a divergence from the New Zealand RDR Framework. The AASB’s For-Profit Entity Standard-Setting Framework sets out that differences between accounting Standards issued in Australia and New Zealand for for-profit entities should be minimised wherever possible to reduce the costs for entities operating trans-Tasman. This divergence could cause inconvenience for entities operating trans-Tasman. Notwithstanding this, the Board noted that the R&M requirements for entities applying the Tier 2 reporting frameworks in Australia and New Zealand would remain consistent and given the current situation of many Australian entities not complying with full R&M requirements, the overall outcome is likely to be more consistency with NZ requirements than currently. The Board further noted that the NZ XRB has asked its stakeholders about the importance of harmonisation with Australia in their Targeted Review of the Accounting Standards Framework in July 2019 and that the NZASB will consider the feedback in future discussions on whether and how to respond to the developments in Australia and internationally.
BC31 The Board also noted that the simplified Tier 2 disclosures are contained in a separate Standard which might not be welcomed by preparers who prefer seeing the disclosure requirements together with the R&M requirements in each Standard. However, only four respondents to ED 295 did not like having a separate disclosure standard. Feedback at the roundtables and webinars was overwhelmingly positive.
BC32 Finally, for entities that were previously preparing SPFS, the adoption of AASB 2020-2 means a step-up in their disclosures. The disclosures will also likely exceed what would have been required under the SDR proposals outlined in paragraph BC13. However, there will be some disclosure relief, as SPFS currently are required to comply with all the disclosures in the mandatory standards (AASB 101, AASB 107, AASB 108, AASB 1048 and AASB 1054) which go beyond what is required under AASB 1060. Furthermore, the doubling of the reporting thresholds for large proprietary companies in April 2019 has already reduced the number of entities that are required to prepare and lodge financial statements with ASIC by approximately 2,300 companies, and the Board has further reduced the burden for affected entities by providing transitional relief for entities that are adopting AASB 2020-2 and AASB 1060 early, ie for financial years beginning before 1 July 2021. Further discussion of the Board’s consideration on this matter is available in AASB 2020‑2 paragraphs BC122−BC153.
BC33 After considering both the advantages and disadvantages noted above, the Board was of the view that the simplified disclosures strike the right balance between user needs and cost to preparers and appropriately address the concerns raised by respondents to ITC 39. In particular, the Board noted the strong support for a consistent reporting framework which requires compliance with full R&M requirements in AAS but revisits the current disclosures that are required for Tier 2 entities under the RDR framework. The disclosures in AASB 1060 will not only be beneficial for entities that are already reporting under Tier 2 but also those entities that will have to step up from SPFS to Tier 2 GPFS when the removal of SPFS for certain for-profit private sector entities that are required to prepare financial statements that comply with AAS or accounting standards through AASB 2020-2 becomes applicable.
BC35 The Board agreed to develop the new disclosures via a bottom-up approach, starting with the existing disclosures in the IFRS for SMEs Standard. This avoids having to identify specific full AAS disclosures that need to be retained and those that can be excluded. This approach also avoids the tendency to retain disclosures in circumstances where a direct comparison is not possible. To distinguish the new disclosure framework from the previous RDR framework, it will be referred to as the ‘Simplified Disclosures’ framework.
BC36 While the Board has decided not to adopt the IFRS for SMEs Standard as an alternative for Tier 2 reporting[51], the IASB’s assessment of user needs and cost-benefit considerations in relation to the disclosures for this group of entities will be similarly relevant to Australian for-profit private sector entities without public accountability. The Board therefore considers the IFRS for SMEs based disclosures an appropriate starting point for developing a disclosure Standard for this group of entities.
BC37 The Simplified Disclosures framework is based on the premise that the disclosures in the IFRS for SMEs Standard should be retained where the R&M requirements and options are the same or similar in the IFRS for SMEs Standard and full IFRS. Disclosures relating to R&M options or treatments in the IFRS for SMEs Standard that are not available in full IFRS will be removed. Disclosures have only been added in comparison with the IFRS for SMEs Standard base where the R&M principles were significantly different or certain topics are not addressed under the IFRS for SMEs Standard.
BC38 In considering the IFRS for SMEs Standard, the Board noted that the nature and degree of the differences between the disclosures in full IFRS Standards and the disclosures in the IFRS for SMEs Standard is determined on the basis of users’ needs and cost-benefit analyses[52]. The Board noted that the overall increase in disclosures for entities transitioning from SPFS (eg related party and financial instrument disclosures) offsets the loss of some disclosures as a result of not having to fully comply with AASB 101, AASB 107, AASB 108, AASB 1048 and AASB 1054. In some instances, based on user feedback, public policy interest (eg audit fees and tax reconciliation – see paragraphs BC75 and BC79–80) or to reflect Australian specific issues (eg imputation credits – see paragraphs BC83-BC84), the Board has retained additional disclosures above IFRS for SMEs.
BC39 The disclosure requirements in the IFRS for SMEs Standard are therefore substantially reduced when compared with the disclosure requirements in full IFRS Standards. The IASB identified the following four principles as being used for the reductions:
(a) some disclosures are not included because they relate to topics covered in IFRS Standards that are omitted from the IFRS for SMEs Standard (as per paragraph BC88 of IFRS for SMEs Standard 2015 – Part B);
(b) some disclosures are not included because they relate to R&M principles in full IFRSs that have been replaced by simplifications in the IFRS for SMEs Standard (as per paragraphs BC98–BC136 of the IFRS for SMEs Standard 2015 – Part B);
(c) some disclosures are not included because they relate to options in full IFRS Standards that are not included in the IFRS for SMEs Standard (as per paragraphs BC84–BC86 of the IFRS for SMEs Standard 2015 – Part B); and
(d) some disclosures are not included on the basis of users’ needs or cost-benefit considerations (as per paragraphs BC44–BC47, BC157 and BC158 of the IFRS for SMEs Standard 2015 – Part B).
BC41 In determining what disclosures to add, the following broad principles have been applied by the Board, which are consistent with those applied by the IASB in developing the disclosures in the IFRS for SMEs Standard[53]:
(a) users of the financial statements of for-profit entities that are not publicly accountable entities are particularly interested in information about short-term cash flows and about obligations, commitments or contingencies, whether or not recognised as liabilities. Thus disclosures in full IFRS Standards that provide this sort of information are necessary;
(b) users of the financial statements of for-profit entities that are not publicly accountable entities are particularly interested in information about liquidity and solvency. Thus disclosures in full IFRS Standards that provide this sort of information are necessary;
(c) information on measurement uncertainties is important;
(d) information about an entity’s accounting policy choices is important;
(e) disaggregations of amounts presented in the financial statements of for-profit entities that are not publicly accountable entities are important for an understanding of those statements; and
(f) some disclosures in full IFRS Standards are more relevant to investment decisions in public capital markets than to the transactions and other events and conditions encountered by typical for-profit entities that are not publicly accountable entities.
BC44 To identify R&M differences, the Board has referred to:
(a) the AASB staff paper Comparison of Standards for Smaller Entities prepared and published in April 2018;
(b) full IFRS vs IFRS for SMEs Standard comparisons included in the IFRS for SMEs Standard modules published by the IASB; and
(c) individual analyses of Standards, where a topic is covered by neither of these two sources.
BC45 Judgement was exercised when applying the framework and the overarching principles of user needs and cost-benefit were considered when determining the disclosures that are relevant for Tier 2 entities. Significant judgements made in this process are explained in paragraphs BC54−BC93.
BC48 This applies in particular to the presentation requirements in AASB 101 and AASB 107 even though these Standards have been replaced in their entirety with AASB 1060 paragraphs 8 to 97. The only exception made relates to the option of not presenting a separate statement of changes in equity as noted in paragraph BC62.
BC49 ED 295 further proposed to replace the presentation requirements of AASB 5 Non-current Assets Held for Sale and Discontinued Operations with those included in the IFRS for SMEs Standard. However, after considering the feedback received on ED 295, the Board decided to amend the proposals to align the presentation requirements in AASB 1060 with those in AASB 5. This will ensure consistency in the presentation of discontinued operations between Tier 1 and Tier 2 entities and is consistent with the overall intention to retain the presentation requirements from full AAS and only adopt the IFRS for SMEs disclosures.
BC51 While the disclosures in the IFRS for SMEs Standard are developed specifically for for-profit private sector entities, the Board agreed that AASB 1060 should also be made applicable to not-for-profit private sector entities and public sector entities, other than the Australian Government and State, Territory and Local Governments. Making AASB 1060 applicable to all Tier 2 entities, whether for-profit or NFP, will result in an immediate reduction in disclosures compared to the current RDR framework, and NFP private sector entities will be able to benefit from this reduction in disclosures while waiting for legislative action on the ACNC legislative review recommendations and for a revised NFP Financial Reporting Framework to be developed[54]. Similarly, public sector entities will also benefit while consideration is being given to improving public sector financial reporting[55]. The Tier 2 disclosure framework may still be relevant to NFP entities as one of the tiers of reporting for that sector even after a revised NFP Financial Reporting Framework is developed.
BC52 While respondents to ED 295 had suggested deferring the mandatory date of AASB 1060 for NFP entities possibly until the NFP private and public sector financial reporting frameworks have been finalised, the Board decided against different application dates to avoid the confusion for users that would come from having two Tier 2 reporting frameworks in operation at the same time.
Replacing entire Standards with AASB 1060
(a) Financial Statement Presentation (AASB 101): paragraphs 8 – 33
(b) Statement of Financial Position (AASB 101): paragraphs 34 – 47
(c) Statement of Profit or Loss and Other Comprehensive Income (AASB 101): paragraphs 48 – 58
(d) Statement of Changes in Equity and Statement of Income and Retained Earnings (AASB 101): paragraphs 59 – 63
(e) Statement of Cash Flows (AASB 107): paragraphs 64 – 89
(f) Notes to the Financial Statements (AASB 101): paragraphs 90 – 103
(g) Consolidated and Separate Financial Statements (AASB 12): paragraphs 104 – 105
(h) Basic Financial Instruments (AASB 7): paragraphs 111 – 119
(i) Other Financial Instruments Issues (AASB 7): paragraphs 120 – 122
(j) Investments in Associates (AASB 12): paragraphs 125 – 128
(k) Investments in Joint Ventures (AASB 12): paragraphs 129 – 131
(l) Related Party Disclosures (AASB 124): paragraphs 189 – 203
BC55 The Board noted that by replacing the five Standards listed in paragraph BC54, this also removes some of the guidance included in these Standards which is not included in the IFRS for SMEs Standard. However, for the sake of maintaining simplicity of the disclosure requirements, the Board considered this to be preferable to considering on a case-by-case basis which guidance should be included and which could be omitted. As noted in paragraph BC47, the Board does not intend the removal of the guidance to result in any differences in the presentation requirements to full AAS. However, in response to stakeholder feedback, the Board added paragraph 2 which specifically permits entities to refer to other Standards for guidance on requirements in this Standard. The Board also added the definitions from the replaced Standards in Appendix A.
(a) the prohibition for Australian entities that apply AASB 1060 to depart from a requirement in an Australian Accounting Standard (paragraph 12 in this Standard and paragraph Aus19.1 in AASB 101);
(b) the specific prohibition to offset assets and liabilities or income and expenses, unless required or permitted by an Australian Accounting Standard (paragraph 24 in this standard and paragraph 32 in AASB 101);
(c) the option to present the net cash flow from operating activities under the indirect method by showing the revenues and expenses disclosed in the statement of comprehensive income and the changes during the period in inventories and operating receivables and payables (paragraph 72 in this standard and paragraph 20 in AASB 107);
(d) options to report certain cash flows on a net basis (paragraphs 75 to 78 in this Standard and paragraphs 22−24 in AASB 107);
(e) the exemption from the disclosure of key management personnel compensation where the entity obtains key management personnel services from another entity (paragraphs 195 and 196 in this standard and paragraphs 17A and 18A in AASB 124).
BC57 The prohibition to depart from a requirement in an Australian Accounting Standard reflects Australian specific circumstances which are also relevant to Tier 2 entities and hence needs to be included. Paragraphs 3.4, 3.5 and 3.6 of the IFRS for SMEs Standard have been deleted, as they are not relevant to entities applying this Standard.
BC58 The offsetting prohibition in paragraph BC56(b) is included in Section 2 Concepts and Pervasive Principles of the IFRS for SMEs Standard (paragraph 2.52). As this section has been otherwise excluded from this Standard on the basis that it does not include any disclosures, the prohibition had to be separately added to this Standard.
BC59 Permitting the options in the presentation of the cash flow statement from AASB 107 ensures that there are no differences in presentation to full AAS and avoids any possible issues, for example for the consolidation of subsidiaries that report under Tier 2 by parent entities that report under Tier 1 (full AAS).
BC60 Retaining the exemption from disclosing key management personnel compensation in paragraph BC56(e) for entities that obtain key management personnel services from another entity avoids having potentially more onerous disclosure requirements than for Tier 1 entities. While arguably the exemption in paragraph 17A of AASB 124 (paragraph 195 in this Standard) only provides relief from disclosing the breakdown of key management personnel compensation that is otherwise required to be disclosed by AASB 124 paragraph 17, the Board noted that the fees paid to a management entity that must be disclosed under paragraph 18A of AASB 124 (paragraph 196 in this Standard) may also cover other services, and that the fees many not specifically identify the amount relating to key management personnel services.
BC61 To avoid any potential R&M differences, the Board further decided to replace the definition of materiality in the IFRS for SMEs Standard with the recently updated definition of material from AASB 101 and added paragraph 23 which clarifies the application of materiality (based on paragraph 31 in AASB 101). The Board also replaced the guidance on the presentation of information in the notes (structure of notes, paragraph 93 in this standard and paragraph 8.4 in the IFRS for SMEs Standard) with the revised guidance from paragraphs 114 and 116 of AASB 101 that was introduced via amendments to AASB 101 in 2015 and added additional guidance to paragraph 40 confirming that the terms of a liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification (from paragraph 69(d) of AASB 101). This will further ensure that there are no presentation differences to full AAS.
BC63 In relation to the replacement of AASB 12, the Board noted that the investment entity exemption from consolidation creates a R&M difference to the IFRS for SMEs Standard. However, based on the principles listed in paragraph BC41, the Board did not consider that additional disclosures would be warranted in relation to this exemption. The Board noted that the IASB discussed the investment entity exception in the context of the 2020 Request for Information Comprehensive Review of the IFRS for SMEs Standard and concluded that few entities eligible to apply the IFRS for SMEs Standard would be investment entities. The Board also expects the exemption to have limited practical impact, since the majority of investment entities will be publicly accountable and therefore not able to apply this Standard.
BC64 In responding to stakeholders’ concerns that an investment entity preparing separate financial statements could not comply with paragraph 105 of this Standard because the paragraph requires the entity to identify the consolidated financial statements or other primary financial statements to which the separate financial statements relate, the Board noted that separate financial statements are defined in AASB 127 Separate Financial Statements as financial statements that are presented in addition to consolidated financial statements or to financial statements that apply equity-accounting to investments in associates or joint ventures (consistent with the definition of separate financial statements in the IFRS for SMEs Standard). Therefore, the financial statements prepared by investment entities would not be separate financial statements under that definition and as a result paragraph 105 would not apply.
Judgements made in adding, removing or adapting the disclosures in the IFRS for SMEs Standard
BC65 The Board has exercised a number of significant judgements while adding, removing and amending disclosures from the certain sections of the IFRS for SMEs Standard.
BC66 In considering the R&M differences between AASB 16 Leases and Section 20 Leases in the IFRS for SMEs Standard, the Board noted that the accounting for all leases held by lessees under AASB 16 is broadly similar to the the accounting for finance leases in the IFRS for SMEs Standard. As a consequence, the Board considered that the disclosures for finance leases should be used as a basis, and only be adapted for different terminology used in AASB 16 (eg referring to variable lease payments instead of contingent rent).
BC67 The Board also decided in principle to adapt the current disclosures for operating leases to apply to short-term leases and leases of low value assets that have not been recognised as right-of-use assets per the exemption in paragraph 6 of AASB 16. However, the Board noted that the disclosures in the IFRS for SMEs Standard about operating lease commitments are more extensive than what is required under paragraphs 55 and 60 of AASB 16. AASB 16 is a recent Standard that was finalised after the IFRS for SMEs Standard was developed. As noted in paragraph BC40, the Board considered that where the IASB has removed disclosures from full IFRS after the IFRS for SMEs Standard was finalised, similar reductions in disclosures should also be carried over to the new Tier 2 Standard. Therefore, the Board decided to replace the disclosures in the IFRS for SMEs Standard with the relevant disclosures from AASB 16.
BC68 In considering the R&M differences between AASB 15 and Section 23 Revenue in the IFRS for SMEs Standard, the Board noted that while the differences may affect the amount and timing of the revenue recognised, under both AASB 15 and Section 23, revenue is either recognised at a point in time or over time. On that basis, the Board decided to adapt the disclosures in the IFRS for SMEs Standard to reflect the different terminology used in AASB 15 but without adding unnecessary details. For example, the requirement to disclose specified categories of revenue has been replaced with a requirement to disaggregate revenue into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The reference to “methods used to determine the stage of completion” has been changed to “methods used to recognise revenue for performance obligations that are satisfied over time”.
BC69 In considering the difference between AASB 123 Borrowing Costs and Section 25 Borrowing Costs in the IFRS for SMEs Standard, the Board noted that the IFRS for SMEs Standard does not permit the capitalisation of borrowing costs and therefore does not require any additional disclosures. As this is an R&M difference, the Board decided to require disclosure of the amount of capitalised borrowing costs on the grounds that total interest is an important element for a user to understand liquidity and solvency of an entity, and that information about these amounts capitalised would therefore be relevant. The Board further considered that the benefits of this disclosure would exceed the cost, noting that it is was also required for RDR entities.
(c) in relation to the section covering employee benefits, disclosures about termination benefits which are over and above what is required under full IFRS/AAS (paragraphs 173(d),(g), 174-175);
(d) disclosures about the entity’s domicile and other general information (paragraph 32), the qualitative factors that make up goodwill (paragraph 142(g)), adjusting events that occurred after the end of the reporting period (paragraph 185) and parent-subsidiary relationships where an entity applies the exemption from providing related party disclosures for government-related entities (paragraph 200);
(e) disclosures about hedging (paragraphs 121 and 122), investments in associates (paragraph 126) and leasing (paragraphs 144(b), 147(d) and 148(b)) where some disclosures were added but many others removed as a result of applying the principles in paragraph BC41; and
(f) a number of disclosures in relation to the section covering transition to Australian Accounting Standards – Simplified Disclosures – see paragraph BC100 for details.
BC71 While acknowledging stakeholders concerns about the potential increase in disclosures, the Board noted that the small increases will be more than offset with the reduction in disclosures in other areas. On this basis, the Board agreed to retain the disclosures from IFRS for SMEs Standard, which have been demonstrated to be appropriate for small and medium sized entities without public accountability. However, consistent with the principles in paragraph BC40, the Board agreed to remove disclosures about specific components of capitalised defined benefit cost, group plans and other long-term benefits from the disclosures proposed in ED 295 as these disclosures had been included in full IFRS when the IFRS for SMEs Standard was first issued, but had since been removed from full IFRS.
BC72 In relation to the adjusting events after the end of the reporting period, the Board noted that paragraph 185 specifically refers to an update of ‘related disclosures’, which is different to the equivelant requirements in AASB 110 Events after the Reporting Period, where paragraph 8 requires the adjustment of amounts recognised in the financial statements and paragraphs 19 and 20 deal with disclosure-related adjustments. While RDR entities were not required to comply with paragraphs 19 and 20 of AASB 110, the Board noted that paragraph 185 refers only to disclosures that relate to amounts recognised in the financial statements and is therefore narrower than the requirements in paragraphs 19 and 20 of AASB 110. On that basis, the Board did not consider the requirements to be particularly onerous and decided to retain them consistent with the principle of consistency with the IFRS for SMEs Standard.
BC73 In considering differences between AASB 138 Intangible Assets and Section 18 Intangible Assets other than Goodwill in the IFRS for SMEs Standard, the Board noted that the IFRS for SMEs Standard does not permit the revaluation of intangible assets and therefore does not require relevant disclosures. The Board decided that these disclosures would be relevant and should be added, using the disclosures for property plant and equipment from paragraph 17.33 of the IFRS for SMEs Standard as a basis. The Board also decided to add a requirement to disclose the reason for an intangible asset having an indefinite useful life based on AASB 140 Investment Property paragraph 122(a), as this option is not available under the IFRS for SMEs Standard.
BC74 However, the IFRS for SMEs Standard also requires for revalued property, plant and equipment the disclosure of the carrying amount of the assets that would have been recognised under the cost model (paragraph 17.33(d) in the IFRS for SMEs Standard). The Board noted that the option to use the revaluation model for property, plant and equipment was only introduced into the IFRS for SMEs Standard as part of the amendments made in 2015. While the Basis for Conclusions to the amendments explain the reasons for permitting this option[56], they do not discuss the associated disclosures that were added in the process. When the Board discussed this particular disclosure requirement in the context of the original RDR disclosures in ED 192 Revised Differential Reporting Framework, it noted that the revaluation model provides more relevant information than the cost model, and that it would appear illogical and irrelevant to provide comparative information about the cost model[57]. The Board therefore concluded that the cost of this disclosure would outweigh the benefits. These arguments are still valid and on that basis the Board decided not to include this particular disclosure from the IFRS from SMEs Standard.
Audit fees
BC75 Stakeholders were generally supportive of adding the requirement to disclose the fees paid to each auditor and reviewer, including any network firm, from AASB 1054 to AASB 1060 (paragraphs 98 and 99). The Board considered that the disclosure of audit fees is a public policy issue (see paragraph BC42) and requiring this disclosure will assist in improving auditor independence and accountability, thereby increasing users’ confidence in the quality of companies’ financial reports. The Board noted that the term ‘network firm’ is defined in APES 110 Code of Ethics for Professional Accountants issued by Accounting and Professional Ethical Standards Board (APESB) (November 2018 incorporating all amendments to April 2018) and that preparers and auditors may refer to APES 110 for guidance.
BC76 A number of respondents to ED 295 and roundtable participants noted an inconsistency in disclosures about the maturity of financial liabilities. While paragraph 144(b) (paragraph 20.13(b) in the IFRS for SMEs Standard) requires disclosure of a quantitative maturity analysis for future lease payments of lessees in fixed time periods, paragraph 114 (paragraph 11.42 in the IFRS for SMEs Standard) only has a general requirement for other financial liabilities to disclose terms and conditions “such as … maturity, repayment schedule …”.
BC77 The Board acknowledged that information about the maturity of an entity’s financial liabilities is important as the users of financial statements of entities that do not have public accountability are particularly interested in information about short-term cash flows, obligations and commitments, and liquidity. However, as stakeholder feedback on this issue was mixed, the Board decided to retain the disclosures consistent with the IFRS for SMEs Standard. Noting that the IFRS for SMEs disclosures, in particular the leasing disclosures, are currently being reviewed by the IASB, the Board decided to flag the inconsistency in the disclosures to the IASB instead.
BC78 However, The Board also noted that while paragraph 114 only has general disclosure requirements, these still require disclosure of the terms and conditions of the debt instrument and make specific reference to the instruments’ maturity and repayment schedule. The Board therefore expects entities to provide this information in some form.
Tax reconciliation
Individually material items of income and expenses
BC81 Some respondents to ED 295 were concerned about the absence of a specific requirement to disclose individually material items of income and expenses and noted that this disclosure is currently explicitly required for both RDR GPFS and SPFS. While the Board acknowledged these concerns, it noted that entities applying this Standard are still expected to disclose information that is not presented elsewhere but that is relevant to an understanding of the financial statement in accordance with paragraph 91(c). This would include information about individually material items of income and expense where information about these items is necessary to assess the entity’s financial performance.
BC82 However, the Board, also agreed to monitor entities’ disclosure practices and may revisit this issue should it become apparent that entities do not provide sufficient disclosures in this regard.
Imputation credits
BC83 In response to stakeholders’ feedback, the Board decided to add in paragraphs 100–103 the disclosure of imputation credits from paragraphs 12–15 in AASB 1054. The Board noted that, although the disclosure of imputation credits was not required under the current RDR framework, it was mandatory for entities preparing SPFS under Part 2M.3 of the Corporations Act 2001 and therefore it should not be onerous to provide for the majority of entities transitioning from SPFS to the new Tier 2 GPFS.
BC84 The Board noted that Australia and New Zealand are among a limited number of jurisdictions that have an imputation tax regime and information about imputation credits provides useful information as the credits have the characteristics of an asset to equity investors. Moreover, published research demonstrates that the franking status of dividends increases the association between dividends and future earnings and therefore provides useful information about an entity’s future earnings potential and short-term cash flows.[58] Requiring the disclosure will ensure that information about the entity’s imputation credits will not be lost when entities transition from SPFS to this Standard.
Specific transition disclosure requirements in another Standard
BC85 The Board noted that other Australian Accounting Standards may provide transition options for entities on initial application and that these options may be accompanied by specific transition disclosure requirements. Examples of such transition options can be found in AASB 15, AASB 16, AASB 1058 Income of Not-for-Profit Entities or AASB 1059 Service Concession Arrangements: Grantors. The Board decided that where this is the case, the entity shall apply the relevant specific transition disclosures that are required under that Standard for the selected transition option instead of the disclosures for a change in accounting policy specified in paragraph 106 of this Standard.
BC86 This is because even though the specific transition option under another Standard may require additional disclosures compared to what would be required under paragraph 106, the Board noted that the targeted disclosures of the selected transition option provide more relevant information about the transitional impact than the general accounting policy change disclosures required under paragraph 106.
BC87 For example, where an entity adopts AASB 16 using the simplified transition approach and does not restate comparative information, AASB 16 paragraph C12 requires disclosure of an explanation of the differences between operating lease commitments disclosed under AASB 117 Leases at the end of the previous annual reporting period to the lease liabilities recognised in the statement of financial position at the date of initial application under AASB 16, together with the weighted average lessee’s incremental borrowing rate applied to the lease liabilities recognised at the date of initial application. In addition, the entity must also disclose whether it has used any of the specified practical expedients when adopting AASB 16. This provides more relevant information than a disclosure of the adjustments recognised for each financial statement line item affected by the new accounting policy in paragraph 106(b) for the current and each prior period presented.
AASB Standards and Interpretations not covered in AASB 1060
(a) AASB 14 Regulatory Deferral Accounts as it would only be relevant for entities that have recognised regulatory deferral account balances under their current accounting policy (eg where the entity prepared SPFS without complying with the R&M of full AAS). None of the respondents to ED 295 identified any entities that intend to apply AASB 14 on transition to GPFS. The Board’s decision also is consistent with IASB’s view that it should not incorporate the requirements of IFRS 14 as part of the current comprehensive review of the IFRS for SMEs Standard[59];
(b) AASB 4 Insurance Contracts, AASB 17 Insurance Contracts, AASB 1023 General Insurance Contracts, AASB 1038 Life Insurance Contarcts and AASB 1056 Superannuation Entities are not addressed in this Standard as the majority of the entities applying these Standards would have public accountability by holding assets in a fiduciary capacity.
The Board acknowledged that AASB 4 and AASB 17 would also be applicable to entities such as ‘captive insurers’ which may not be publicly accountable and hence would be eligible to apply this Standard. These entities will have to provide the full disclosures of AASB 4 or AASB 17, as the disclosures in these standards have not been replaced by AASB 1060. However, the Board was of the view that ‘captive insurers’ deal only with insurance contracts within their own group and as a result are likely to have relatively simple insurance arrangements. They would therefore not be unduly impacted by the full disclosure requirements under these Standards.
In relation to AASB 1056, the Board concluded that superannuation entities are currently divided between Tier 1 entities and non-reporting entities (including Small Australian Prudential Regulation Authority (APRA) Funds (SAFs) and Self-Managed Superannuation Funds (SMSFs)). Accordingly, Tier 2 disclosures were not developed for these entities. The Board further noted that there is currently no legislative requirements for superannuation entities to prepare financial statements in accordance with AAS. Until such time as the legislation is changed, superannaution entities could therefore continue preparing SPFS and thus AASB 1056 has been excluded from this Standard.
(c) AASB 8 Operating Segments and AASB 133 Earnings per Share require disclosure of segment information and of earnings per share data only for entities which have debt or equity instruments that are traded, or are in the process of being issued for trading in a public market. These entities would have public accountability and, accordingly, the Board decided that these Standards are not applicable for Tier 2 entities. Instead, consistent with the IFRS for SMEs Standard, paragraph 33 refers back to these Standards and provides that an entity disclosing segment information or earnings per share must comply with AASB 8 or AASB 133 respectively in full.
(d) AASB 134 Interim Financial Reporting is applicable for the specific purpose of preparing interim financial reports and AASB 1039 Concise Financial Reports is applicable for the specific purpose of preparing concise reports under the Corporations Act 2001. AASB 1060 is intended to be used in the preparation of annual GPFS. Accordingly, the Board considered that AASB 134 and AASB 1039 are not relevant in relation to this disclosure Standard.
(e) The majority of the disclosures from AASB 1054 are now covered in AASB 1060: paragraphs 7 and 8 of AASB 1054 are covered in paragraphs 10–11 of AASB 1060, paragraphs 10 and 11 of AASB 1054 are covered in paragraphs 98 and 99 of AASB 1060 as discussed in paragraph BC75 and paragraphs 12–15 of AASB 1054 are covered in paragraphs 100–103 of AASB 1060 as discussed in paragraphsBC83–BC84. Paragraph 9 of AASB 1054 will no longer be relevant as it refers to SPFS and paragraph 16 of AASB 1054 does not provide information about short-term cash flows, obligations, commitment, contingencies, liquidity or solvency and is therefore not required.
(f) AASB 1057 and AASB 1053 do not include any R&M or disclosure requirements and as a result have not been included in this Standard.
(a) If the Basis for Conclusions in the IFRS for SMEs Standard confirmed that particular interpretations had been incorporated in the IFRS for SMEs Standard, no further action was required.
(b) No action was required for interprations that have been superseded or do not have any disclosure requirements.
(a) AASB Interpretation 1019 The Superannuation Contributions Surcharge and AASB Interpretation 1047 Professional Indemnity Claims Liabilities in Medical Defence Organisations are not relevant for Tier 2 entities, as entities applying these interpretations would have public accountability by holding assets in a fiduciary capacity.
(b) The disclosures in AASB Interpretation 1052 Tax Consolidation Accounting Disclosure were excluded for RDR entities on the basis of cost-benefit considerations. In addition, as the interpretation is not creating any R&M differences to IAS 12, and therefore also not to the IFRS for SMEs Standard, the Board concluded that additional disclosures will not be required.
(c) The disclosure paragraphs in AASB Interpretation 23 Uncertainty over Income Tax Treatments do not introduce new disclosures, but refer to disclosures in the AASB 112 that are captured in paragraphs 96, 97 and 154 of AASB 1060.
(d) Two of the three disclosure paragraphs in AASB Interpretation 5 Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds were already excluded for Tier 2 entities on the basis of cost-benefit considerations. However, as there are also no R&M differences to the IFRS for SMEs Standard, the Board concluded that no additional disclosures would be required.
Not-for-profit private sector entities and public sector entities
BC92 In summary, the Board decided to:
(a) include additional disclosures for AASB 1, AASB 16, AASB 102 and AASB 123 to address R&M differences that are specific to NFP entities; and
(b) include additional disclosures for AASB 1004, AASB 1050, AASB 1051, AASB 1055, AASB 1058 and AASB 1059 which are only applicable for NFP private sector and/or public sector entities.
Consistent with the conclusions in paragraph BC53, the proposed disclosures reflect the fact that the relevant transactions and circumstances covered are unique to NFP private sector and/or public sector entities and that users would require information on non-financial accountability and stewardship, even if the broad principles in paragraph BC41 would not indicate such a need.
Drafting conventions and future maintenance
BC94 While ED 295 used the numbering from the IFRS for SMEs Standard, the Board agreed to use consecutive paragraph numbers in this Standard consistent with the approach used in other AAS. To show the linkage to the IFRS for SMEs disclosures and allow easy comparison, equivalent IFRS for SMEs paragraph numbers are added at the end of each paragraph where applicable. Where paragraphs from the IFRS for SMEs Standard have been amended, the words ‘based on’ are used.
BC96 The Board also acknowledged that a review of the disclosures will need to take place any time the IFRS for SMEs Standard is updated, a new Australian Accounting Standard or Interpretation is issued or amendments are made to existing Australian Accounting Standards or Interpretations.
(a) adjustments to recognised amounts will only arise where an entity did not previously report either under Tier 1 or Tier 2 (RDR); and
(b) the principles of transitioning to full R&M requirements are the same, regardless of the level of disclosures to be provided.
BC98 Therefore, the Board concluded that the transition requirements in paragraph 18A of AASB 1053 can be retained without further changes (except some changes required by AASB 2020-2 to clarify the scope of the paragraph for certain entities required to consolidate for the first time). However, the Board decided to add an explanatory paragraph 18C to AASB 1053 which confirms the different disclosures that apply to Tier 2 entities that apply this Standard.
BC99 The Board acknowledged that the adoption of this new Tier 2 Standard as such will not result in any adjustments to recognised amounts unless an entity has not previously complied with all R&M requirements of AAS and is preparing GPFS for the first time. Separate transition relief has been provided in Appendix E of AASB 1053 Application of Tiers of Australian Accounting Standards for entities moving from SPFS to Tier 2 GPFS when adopting the requirements of AASB 2020-2. Further discussion of the Board’s consideration on this matter is available in AASB 2020-2 paragraphs BC122−BC144.
BC101 In proposing the effective date in ED 295, the Board had noted that the revised Conceptual Framework as issued by the IASB in March 2018 is effective for annual periods beginning on or after 1 January 2020 and that the regulations in relation to doubling of thresholds for large proprietary companies are applicable to financial years beginning on or after 1 July 2019.
BC103 However, respondents to ED 295 and ED 297 expressed mixed views on the proposed effective date, with many recommending the Board defer the effective date of both standards by one to two years. After considering the arguments provided by stakeholders and various options, the Board ultimately decided to defer the effective date of both standards by one year to financial years beginning on or after 1 July 2021, with early adoption permitted.
BC104 Further discussion of the Board’s consideration on this matter is available in AASB 2020-2 paragraphs BC145−BC153.
Basis for Conclusions on AASB 2020-7
This Basis for Conclusions accompanies, but is not part of, AASB 1060. The Basis for Conclusions was originally published with AASB 2020-7 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions: Tier 2 Disclosures.
Introduction
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the bases for key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
Reasons for proposing amendments to AASB 1060
BC2 In June 2020, the Board issued AASB 2020-4 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions to make amendments to AASB 16 Leases to provide lessees with an optional exemption from assessing whether a COVID-19-related rent concession is a lease modification. The amendments added a new paragraph 60A to AASB 16, which requires an entity applying the practical expedient to disclose:
(a) that it has applied the practical expedient to all rent concessions that meet the conditions in paragraph 46B of AASB 16 or, if not applied to all such rent concessions, information about the nature of the contracts to which it has applied the practical expedient; and
(b) the amount recognised in profit or loss for the reporting period to reflect changes in lease payments that arise from rent concessions to which the lessee has applied the practical expedient in paragraph 46A of AASB 16.
BC3 The amendments further provide relief from providing the information required by AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors paragraph 28(f) in the reporting period in which the lessee first applies the amendments made by AASB 2020-4 through paragraph C20B of AASB 16.
BC4 The Board considered whether these disclosures should also apply to entities that intend to adopt AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities. The Board referred to the principles used when developing the disclosures in AASB 1060, which are described in paragraphs BC34–BC50 in the Basis for Conclusions to that Standard. In particular:
(a) the disclosures in the IFRS for SMEs Standard should be retained where the recognition and measurement (R&M) requirements and options are the same or similar in the IFRS for SMEs Standard and full IFRS Standards (and therefore Australian Accounting Standards);
(b) where R&M options or treatments in the IFRS for SMEs Standard are not available in full IFRS Standards (and therefore Australian Accounting Standards), the related IFRS for SMEs disclosures are removed; and
(c) where the R&M principles in full IFRS Standards (and therefore Australian Accounting Standards) are significantly different from those in the IFRS for SMEs Standard or certain topics are not addressed in the IFRS for SMEs Standard, disclosures may be added. To determine whether to add any disclosures, the Board refers to the principles applied by the IASB in developing the disclosures in the IFRS for SMEs Standard, which are set out in paragraph BC8 below.
In addition to applying these principles, the Board also considers whether to add disclosures to address matters of public policy or to reflect Australian-specific issues.
BC5 Based on these principles, the Board agreed to use the following approach when considering whether to add to or amend disclosure requirements in AASB 1060 in relation to amendments made by the IASB to full IFRS Standards:
(a) if the amendments introduce significant R&M differences between full IFRS Standards and the IFRS for SMEs Standard, apply the principles applied by the IASB in developing the IFRS for SMEs Standard, as summarised in paragraph BC8;
(b) if the amendments do not introduce significant R&M differences, no further action is required unless the disclosures address a matter of public policy or are of particular relevance in the Australian environment.
BC6 In relation to the COVID-19-related rent concessions, the Board noted that the IFRS for SMEs Standard does not discuss how to account for lease modifications. Paragraph 10.4 of the IFRS for SMEs Standard explains that management shall use its judgement in developing and applying accounting policies that result in relevant and reliable information. Paragraph 10.6 further states that in making the judgement, management may also consider the requirements and guidance in full IFRS Standards dealing with similar and related issues. It is therefore possible that the expedient provided under full IFRS Standards may not result in significant differences in the R&M requirements. On that basis, it would arguably not be necessary to consider whether to add any disclosures to AASB 1060.
BC7 However, as the practical expedient introduces a significant exemption from the accounting principles in AASB 16 that is only available to entities in the limited circumstances set out in AASB 16 paragraph 46B, the Board was of the view that this would be a situation where additional disclosures may be warranted.
BC8 The Board therefore referred to the principles applied by the IASB in developing the disclosures in the IFRS for SMEs Standard. These principles consider that users of the financial statements of for-profit entities that are not publicly accountable are particularly interested in information about:
(a) short-term cash flows and obligations, commitments or contingencies, whether or not recognised as liabilities;
(b) liquidity and solvency;
(c) measurement uncertainties;
(d) accounting policy choices; and
(e) disaggregations of amounts presented in the financial statements.
The principles further note that some disclosures in full IFRS Standards are more relevant to investment decisions in public capital markets than to transactions and other events and conditions encountered by entities without public accountability.
BC9 Applying the practical expedient in AASB 16 paragraph 46A is an accounting policy choice. Entities would therefore already be required to explain if they have used the expedient, and to what extent, when describing their accounting policies and the basis of preparation of their financial statements under paragraph 95(b) of AASB 1060. However, the Board noted that adding a specific disclosure requirement to AASB 1060 would ensure all entities applying the expedient state this fact in their basis of preparation, regardless of whether they are reporting under Tier 1 or Tier 2. Providing information about accounting policy choices made by the entity is further supported by the principle in paragraph BC8(d).
BC10 In relation to the amount recognised in profit or loss for the reporting period, the Board noted that this provides information about the disaggregation of amounts presented in the statement of profit or loss, and is hence supported by paragraph BC8(e). The disclosure may also provide further insights about the entity’s liquidity and solvency (paragraph BC8(b)) and would improve the comparability of financial statements of lessees that have applied the practical expedient and those that have not.
BC11 Furthermore, if the entity had applied AASB 16 in a prior period, adopting the practical expedient would be a change in accounting policy and the entity would have to disclose the impact of this change on the current and prior periods under paragraph 28(f) of AASB 108, but for the disclosure relief added to AASB 16 (paragraph C20B) by AASB 2020-4. Noting that there should be no impact on prior periods as the practical expedient is limited to COVID-19-related rent concessions, disclosing the amount recognised in profit or loss for the reporting period would provide essentially the same information as required under AASB 1060 paragraph 106(b), which is the equivalent paragraph to AASB 108 paragraph 28(f). Requiring disclosure of the amount recognised in profit or loss but providing relief from compliance with paragraph 106(b) would therefore not result in any additional disclosures being required under AASB 1060.
BC12 Considering that the proposed new requirements are not expected to result in an increase in disclosures, the Board agreed to propose amendments to AASB 1060 that would replicate the disclosure changes made to AASB 16 and AASB 108 by AASB 2020-4. The Board further noted that the additional disclosures would apply only to COVID-19-related rent concessions and were warranted because of the special circumstances leading to the practical expedient in AASB 16. The amendments do not alter the fact that disclosure of variable lease payments is not required under the IFRS for SMEs Standard and therefore also not required under AASB 1060.
Tier 2 Reduced Disclosure Requirements
BC13 The Board also considered whether the new disclosures in AASB 16 should be reduced for entities reporting under the Tier 2 Reduced Disclosure Requirements (RDR) framework (Tier 2 RDR entities). In doing so, the Board referred to the ‘user need’ and ‘cost-benefit’ principles set out in the ‘Tier 2 Disclosure Principles’ document of the RDR decision-making framework. These principles were also based on the principles applied by the IASB in developing the disclosures in the IFRS for SMEs Standard and are the same as those summarised in paragraph BC8.
BC14 The considerations in paragraphs BC9–BC12 are therefore also relevant for Tier 2 RDR entities. Disclosure of the accounting policies applied by the entity is already required under AASB 101 Presentation of Financial Statements paragraph 117(b), and without the relief introduced by paragraph C20B of AASB 16, entities that had previously applied AASB 16 would need to disclose the impact of the change in accounting policy on each financial statement line item affected.
BC15 On that basis, the Board took the view that the additional disclosures introduced by AASB 16 paragraph 60A should not be reduced for Tier 2 RDR entities and the disclosure relief in paragraph C20B should be available to such entities. This approach would mean that no further changes would need to be made to AASB 16 in relation to Tier 2 RDR.
Issue of ED 303 Covid-19-Related Rent Concessions: Tier 2 Disclosures
BC16 The Board’s proposals were exposed for public comment in July 2020 through Exposure Draft ED 303 Covid-19-Related Rent Concessions: Tier 2 Disclosures. Noting that the practical expedient added to AASB 16 is already available for early adoption as at 30 June 2020, the Board agreed on a short exposure period of 14 days from the day of issue of the ED. The Board received feedback through two submissions and discussions with stakeholders, which were supportive of the proposed amendments. The Board therefore decided to finalise and approve the amendments as proposed.
Operative date and early application
BC17 While the amendments made by AASB 2020-4 are effective for annual reporting periods beginning on or after 1 June 2020, the Board noted that AASB 1060 does not become operative until annual reporting periods beginning on or after 1 July 2021. The specified operative date for the amendments made by this Standard therefore could not be earlier than 1 July 2021. However, the Board considered that entities should be required to apply these amendments earlier if they apply both:
(a) AASB 1060; and
(b) the practical expedient in paragraph 46A of AASB 16;
to a reporting period beginning before 1 July 2021.
Basis for Conclusions on AASB 2020-9
This Basis for Conclusions accompanies, but is not part of, AASB 1060. The Basis for Conclusions was originally published with AASB 2020-9 Amendments to Australian Accounting Standards – Tier 2 Disclosures: Interest Rate Benchmark Reform (Phase 2) and Other Amendments.
Introduction
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the bases for key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
Tier 2 Simplified Disclosures – amendments to AASB 1060
BC2 In September 2020, the Board issued AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 to help entities to provide financial statement users with useful information about the effects of the interest rate benchmark reform on those entities’ financial statements. New paragraphs 24I and 24J were added to AASB 7 Financial Instruments: Disclosures to require an entity applying the amendments to disclose information about:
(a) the nature and extent of risks to which the entity is exposed arising from financial instruments subject to interest rate benchmark reform, and how the entity manages these risks; and
(b) the entity’s progress in completing the transition to alternative benchmark rates and how the entity is managing the transition.
BC3 The amendments also give relief from providing the information otherwise required by AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors paragraph 28(f) in the reporting period in which the entity first applies the amendments made by AASB 2020-8 through new paragraph 44HH of AASB 7.
Reasons for not adding any disclosures to AASB 1060
BC4 The Board considered whether the new disclosures should also apply to entities that intend to adopt AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities. The Board referred to the principles used when developing the disclosures in AASB 1060, in particular:
(a) the disclosures in the IFRS for SMEs Standard should be retained where the recognition and measurement (R&M) requirements and options are the same or similar in the IFRS for SMEs Standard and full IFRS Standards (and therefore Australian Accounting Standards);
(b) where R&M options or treatments in the IFRS for SMEs Standard are not available in full IFRS Standards (and therefore Australian Accounting Standards), the related IFRS for SMEs disclosures are removed; and
(c) where the R&M principles in full IFRS Standards (and therefore Australian Accounting Standards) are significantly different from those in the IFRS for SMEs Standard or certain topics are not addressed in the IFRS for SMEs Standard, disclosures may be added. To determine whether to add any disclosures, the Board refers to the principles applied by the International Accounting Standards Board (IASB) in developing the disclosures in the IFRS for SMEs Standard, which are set out in paragraph BC5.
In addition to applying these principles, the Board also considers whether to add disclosures to address matters of public policy or to reflect Australian-specific issues.
(a) short-term cash flows and obligations, commitments or contingencies, whether or not recognised as liabilities;
(b) liquidity and solvency;
(c) measurement uncertainties;
(d) accounting policy choices; and
(e) disaggregations of amounts presented in the financial statements.
The principles further note that some disclosures in full IFRS Standards are more relevant to investment decisions in public capital markets than to transactions and other events and conditions encountered by entities without public accountability.
(a) if the amendments introduce significant R&M differences between full IFRS Standards and the IFRS for SMEs Standard, apply the principles applied by the IASB in developing the IFRS for SMEs Standard, as summarised in paragraph BC5; and
(b) if the amendments do not introduce significant R&M differences, no further action is required unless the disclosures address a matter of public policy or are of particular relevance in the Australian environment.
BC7 The Board therefore considered whether the amendments made to AASB 9 Financial Instruments, AASB 4 Insurance Contracts, AASB 16 Leases and AASB 139 Financial Instruments: Recognition and Measurement by AASB 2020-8 will result in significant R&M differences to the IFRS for SMEs Standard.
Differences arising from the practical expedient for particular changes to contractual cash flows
BC8 The Board noted that the IFRS for SMEs Standard does not deal with the impact of interest rate benchmark reform on financial reporting or provide a practical expedient for similar situations. The amendments to AASB 9 mean that the changes made to the basis for determining the contractual cash flows as a result of interest rate benchmark reform are accounted for in the same way as the re-estimation of future interest payments on variable-rate financial assets and financial liabilities. In particular, the rules on accounting for modifications of contractual cash flows in AASB 9 do not apply.
BC11 The Board therefore concluded that the modifications arising as a result of interest rate benchmark reform should not result in significant R&M differences between the amended IFRS Standards and the IFRS for SMEs Standard that would warrant additional disclosures for Tier 2 entities applying the new Simplified Disclosures framework in AASB 1060.
Differences arising from the relief from specific hedge accounting requirements
BC12 The Board noted that the IFRS for SMEs Standard permits hedge accounting only for four specific types of instruments listed in the Standard, including interest rate swaps. While the IFRS for SMEs Standard is less restrictive regarding the types of risks that can qualify for hedge accounting and hedge ineffectiveness, it requires an entity to discontinue hedge accounting if:
(a) the hedging instrument expires or is sold or terminated;
(b) the hedge no longer meets the conditions for hedge accounting specified in paragraph 12.16; or
(c) the entity revokes the designation.
BC13 In the IFRS Interest Rate Benchmark Reform—Phase 2 amendments, the IASB observed that amending the formal designation of a hedging relationship to reflect changes required by the reform would result in the hedging relationship being discontinued. The Board noted this is because both AASB 9 (paragraph 6.4.1) and AASB 139 (paragraph 88) require the formal designation of a hedging relationship to be documented at inception as part of the qualifying criteria for hedge accounting to be applied. The hedge documentation includes identification of the hedging instrument, the hedged item, the nature of the risk being hedged and how the entity will assess hedge effectiveness. Although in limited circumstances AASB 9 permits the hedge documentation to be updated without resulting in the discontinuation of hedge accounting, AASB 139 requires hedge accounting to be discontinued when any amendments are made to the hedge designation as documented at the inception of the hedging relationship.
BC14 The Board further noted that the term “at inception” is a notable omission in the IFRS for SMEs Standard. Given the absence of an explicit reference to the formal designation and documentation at the inception of a hedge in the IFRS for SMEs Standard, the Board took the view that changes to hedge designations and hedge documentation that are required as a result of the reform would not necessarily result in the discontinuation of hedge accounting under the IFRS for SMEs Standard. The relief from specific hedge accounting requirements introduced by the amendments to AASB 9 and AASB 139 is therefore unlikely to result in significant R&M differences.
Other considerations
BC15 The IFRS for SMEs Standard also permits accounting under IAS 39 Financial Instruments: Recognition and Measurement but does not require any additional disclosures beyond what is in the IFRS for SMEs Standard. The Board noted in the IASB’s Request for Information on the Comprehensive Review of the IFRS for SMEs Standard that the IASB is considering replacing the option of applying IAS 39 with an option to apply IFRS 9 Financial Instruments, while still retaining the disclosures from the IFRS for SMEs Standard. The Board considered this further supports the argument that no additional disclosures from AASB 2020-8 should be required, as an entity applying the IFRS for SMEs Standard and IAS 39 or IFRS 9 would apply the Interest Rate Benchmark Reform—Phase 2 amendments and not be required to provide any additional disclosures under the view in the Request for Information.
BC16 The Board further considered whether the new disclosure requirements added to AASB 7 address a matter of public policy or are of particular relevance to the Australian environment but did not consider this to be the case. Finally, the Board noted that should interest rate benchmark reform have a material effect on an entity such that knowledge about the financial effects is necessary for an understanding of the financial statements, disclosure would still be required under the general provisions of paragraph 91 in AASB 1060.
BC17 On that basis, the Board took the view that the additional disclosures introduced by AASB 7 paragraphs 24I and 24J should not be added to AASB 1060.
Reasons for providing disclosure relief in AASB 1060
BC18 The Board noted that the IASB decided not to require entities to provide the disclosures otherwise required by IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors paragraph 28(f) because the cost of providing quantitative information about the effect of the changes in accounting policy that are associated with the amendments to IFRS Standards could outweigh the benefits. The Board took the view that this would similarly apply to entities reporting under AASB 1060 and therefore decided to introduce a similar exception into AASB 1060 by adding a new paragraph 107A.
Tier 2 Reduced Disclosure Requirements
BC19 The Board also considered whether the new disclosure requirements in AASB 7 should be reduced for entities reporting under the Tier 2 Reduced Disclosure Requirements (RDR) framework (Tier 2 RDR entities). In doing so, the Board referred to the ‘user need’ and ‘cost-benefit’ principles set out in the ‘Tier 2 Disclosure Principles’ document of the RDR decision-making framework. These principles were also based on the principles applied by the IASB in developing the disclosures in the IFRS for SMEs Standard and are the same as those summarised in paragraph BC5.
BC21 The Board further considered that the disclosure requirements in paragraphs 24I and 24J(a) and (c) of AASB 7 provide further detail about the entity’s risk management and hedging strategy. Tier 2 entities already disclose this information under paragraphs 22A and 22B of AASB 7. The additional disclosures are therefore consistent with the current level of RDR disclosures.
BC22 While Tier 2 entities applying RDR are not otherwise required to disclose quantitative information such as that required by paragraph 24J(b) of AASB 7, the Board considered that the information is expected:
(a) to be available to an entity as a result of the implementation of the interest rate benchmark reform and therefore the preparation of such disclosure is not expected to be burdensome;
(b) not to be onerous as the requirements allow entities to choose the basis for disclosing the quantitative information, thereby being able to leverage information already available, which would reduce costs while still providing useful information; and
(c) to be required only for a limited period of time, as the application of the amendments in Phase 2 is associated with changes to financial instruments or hedging relationships subject to a particular reformed benchmark interest rate.
BC23 The disclosure requirements in paragraphs 24I and 24J of AASB 7 also require further information about the disaggregation of amounts presented in financial statements and the transactions and other events encountered by these entities. The Board referred to the Tier 2 Disclosure Principles summarised in paragraph BC5 and considered that where the amounts in question are material, user needs and the benefits of the information would outweigh the limited cost of preparing the disclosures.
BC24 The Board further considered that entities applying the amendments should not be required to disclose the information otherwise required by paragraph 28(f) of AASB 108. As this relief is provided to entities reporting under the Tier 1 framework, the Board took the view that it should also be available for Tier 2 entities applying RDR so that they are not disadvantaged compared with entities reporting under Tier 1.
BC26 On that basis, the Board took the view that the additional disclosure requirements introduced by AASB 7 paragraphs 24I and 24J should not be reduced for Tier 2 RDR entities but that the relief from disclosing information about the financial effects of changes in accounting policy in paragraph 44HH should be available to such entities. This approach means that no further changes need to be made to AASB 7 in relation to Tier 2 RDR.
Issue of ED 304 Interest Rate Benchmark Reform – Phase 2: Tier 2 Disclosures
BC27 The Board’s proposals were exposed for public comment in October 2020 through Exposure Draft ED 304 Interest Rate Benchmark Reform – Phase 2: Tier 2 Disclosures. Noting that there may be entities intending to early adopt AASB 1060, the Board agreed on a short exposure period of 30 days from the day of issue of the ED to ensure the relief would be available when needed. The Board did not receive any written submissions on the ED, but did receive verbal feedback from one stakeholder that was generally supportive of the proposed amendments, other than the proposal for differing disclosure outcomes for the two types of Tier 2 entities. The Board reaffirmed the considerations set out in the Basis for Conclusions on this matter and decided to finalise and approve the amendments as proposed.
Basis for Conclusions on AASB 2021-1
This Basis for Conclusions accompanies, but is not part of, AASB 1060. The Basis for Conclusions was originally published with AASB 2021-1 Amendments to Australian Accounting Standards – Transition to Tier 2: Simplified Disclosures for Not-for-Profit Entities.
Introduction
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the bases for key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
Reasons for issuing this Standard
BC2 The Board noted that not-for-profit (NFP) entities transitioning from either Tier 1: Australian Accounting Standards or Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements (RDR) and adopting Tier 2: Australian Accounting Standards – Simplified Disclosures (SD) early (ie for reporting periods beginning before 1 July 2021) would not be able to access the transitional relief that is available to for-profit private sector entities. For-profit private sector entities that transition between the Tier 2 frameworks by adopting Tier 2 SD early are provided optional relief from presenting comparative information in the notes to the financial statements if the entity did not previously disclose the comparable information in its most recent previous financial statements. This relief is set out in paragraph E4 of AASB 1053 Application of Tiers of Australian Accounting Standards. For-profit private sector entities that transition from Tier 1 to Tier 2 SD early are also provided with this same optional disclosure relief.
BC3 To address this difference, the Board decided to make a narrow-scope amendment to AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities to provide NFP entities with the same optional transition relief as for-profit entities when transitioning early from Tier 1 or Tier 2 RDR to Tier 2 SD.
Issue of Exposure Draft ED 306
BC4 The Board’s proposals with respect to the transition relief finalised in this Standard were exposed for public comment in December 2020 as part of Exposure Draft ED 306 Transition Between Tier 2 Frameworks for Not-for-Profit Entities.
BC5 The significant issues considered by the Board in developing ED 306 are addressed in the following sections.
Scope
Location of amendments
Other amendments
BC10 The Board also proposed some editorial improvements to AASB 1053 to highlight that the relief set out in Appendix E of AASB 1053 applies only to for-profit private sector entities.
Finalisation of ED 306 proposals
BC11 Following the consultation period, and after considering the comments received, the Board decided to proceed with issuing this Standard, with minimal changes from the proposals in ED 306.
Feedback from respondents on ED 306
BC12 The Board received six formal comment letters on ED 306. The feedback received indicated that, in general, all respondents were supportive of the proposals. However, some respondents suggested that:
(b) consequently, AASB 1060 may not be the best place for the proposed amendments, given their support for additional transitional relief for NFP entities.
BC13 The Board considered this feedback and decided:
(a) to extend the relief from presenting comparative information for those disclosures not previously made to also include transition from Tier 1 to Tier 2 SD. This was because both Tier 1 and Tier 2 SD are prepared on the same recognition and measurement basis and there would be very few, if any, disclosures for which comparative information was not presented. Extending the relief would therefore have a limited impact on comparability and would provide consistent optional relief for NFP entities transitioning between types of general purpose financial statements;
(b) not to provide any relief to NFP entities transitioning from SPFS at this time. As noted in paragraphs BC7 and BC8, NFP entities are not currently required to transition from SPFS. The Board did however reaffirm that it intends to consider specific transition relief for NFP entities, including those that may be required to transition from SPFS, as part of its NFP Private Sector Financial Reporting Framework project; and
(c) AASB 1060 remained the most appropriate location for these amendments. Although the optional relief in this Standard no longer applies solely to NFP entities transitioning between Tier 2 frameworks, the Board heard no compelling reasons to relocate the amendments from AASB 1060. NFP entities applying the optional relief will be transitioning to Tier 2 SD. Therefore, including the relief in the applicable Tier 2 Standard (AASB 1060) remained appropriate.
BC14 To ensure consistency between for-profit private sector entities and NFP entities, it was necessary to align the effective date of this Standard with the effective date of the equivalent relief available to for-profit private sector entities. For this reason, the Board decided that this Standard would be effective for annual periods beginning on or after 1 July 2021, with earlier application permitted, provided AASB 1060 is also applied to the same period.
Basis for Conclusions on AASB 2021-6
This Basis for Conclusions accompanies, but is not part of, AASB 1060. The Basis for Conclusions was originally published with AASB 2021-6 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies: Tier 2 and Other Australian Accounting Standards.
Introduction
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
Reasons for issuing this Standard
BC2 In March 2021, the Board issued AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates. This Standard amended:
(a) AASB 7 Financial Instruments: Disclosures, to clarify that information about measurement bases for financial instruments is expected to be material to an entity’s financial statements;
(b) AASB 101 Presentation of Financial Statements, to require entities to disclose their material accounting policy information rather than their significant accounting policies;
(c) AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors, to clarify how entities should distinguish changes in accounting policies and changes in accounting estimates;
(d) AASB 134 Interim Financial Reporting, to identify material accounting policy information as a component of a complete set of financial statements; and
(e) AASB Practice Statement 2 Making Materiality Judgements, to provide guidance on how to apply the concept of materiality to accounting policy disclosures.
BC3 The amendments made by AASB 2021-2 principally affect the disclosure requirements and guidance in some Tier 1 Australian Accounting Standards.[60] The Board decided it was appropriate to make similar amendments to domestic Australian Accounting Standards, including the Tier 2 Standard AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities, to ensure there is consistency in the terminology used across Australian Accounting Standards.
Issue of Exposure Draft ED 312
BC4 The Board’s proposals with respect to the amendments finalised in this Standard were exposed for public comment in August 2021 through Exposure Draft ED 312 Disclosure of Accounting Policies – Proposed Amendments to Tier 2 and Other Australian Accounting Standards.
BC5 The significant issues considered by the Board in developing ED 312 are addressed in the following sections.
Relevance of the amendments to AASB 1060
BC6 The AASB For-Profit Entity Standard-Setting Framework and the AASB Not-for-Profit Entity Standard-Setting Framework outline the approach adopted by the Board in considering whether to add to or amend disclosure requirements in AASB 1060 when the IASB makes amendments to full IFRS Standards.
BC7 Applying this approach, ED 312 proposed that in relation to the amendments made by AASB 2021‑2 to:
(a) AASB 101 and AASB 7:
(i) where AASB 1060 contains a corresponding paragraph, AASB 1060 should be updated in a similar manner. If the corresponding paragraph in AASB 1060 is not updated, entities may interpret and apply the requirements of AASB 1060 differently from the corresponding requirements in those Standards; and
(ii) where guidance paragraphs were added to AASB 101, these paragraphs should be added to AASB 1060. The intention of these paragraphs is to assist entities in determining whether accounting policy information is material to their financial statements. Therefore, the Board expected this guidance also to be useful for entities preparing Tier 2 financial statements. As AASB 101 does not apply directly to entities applying AASB 1060 (paragraph 2 of AASB 1060 permits entities to refer to other Standards for guidance), the Board considered that a cross-reference to AASB 101 would be unhelpful to users of AASB 1060 and took the view that these paragraphs should be added to AASB 1060;
(b) AASB 134 and AASB Practice Statement 2 – no changes to AASB 1060 were required:
(i) AASB 134 applies to the preparation of interim financial reports, whereas AASB 1060 is intended to be used in the preparation of annual general purpose financial statements. Therefore, AASB 1060 does not include any requirements equivalent to those in AASB 134; and
(ii) AASB Practice Statement 2 provides non-mandatory guidance to all entities on making materiality judgments when preparing general purpose financial statements in accordance with Australian Accounting Standards. Therefore, AASB 1060 does not include any requirements equivalent to those in AASB Practice Statement 2; and
(c) AASB 108 – no changes to AASB 1060 were required. The amended paragraphs in AASB 108 already apply to entities complying with AASB 1060.
Relevance of the amendments to other Australian Accounting Standards
BC8 The Board reviewed the requirements of all domestic Australian Accounting Standards (including Interpretations) and Australian-specific requirements in Standards, as identified with the ‘Aus’ prefix. The Board noted that two domestic Standards in addition to AASB 1060 contain references to ‘significant accounting policies’: AASB 1049 Whole of Government and General Government Sector Financial Reporting and AASB 1054 Australian Additional Disclosures. The Board also considered it appropriate to propose amendments to these Standards to reflect the updated terminology (ie to require or refer to the disclosure of material accounting policy information rather than the disclosure of significant accounting policies) for consistency across all Australian Accounting Standards.
Finalisation of ED 312 proposals
BC9 Following the consultation period, and after considering the comments received, the Board decided to proceed with issuing this Standard, with minimal changes from the proposals in ED 312.
Feedback from respondents on ED 312
BC10 The Board received formal comment letters on ED 312 from three stakeholders and verbal feedback from another stakeholder. The feedback received indicated that, in general, all respondents were supportive of the proposals. However, some respondents provided additional feedback:
(a) one stakeholder noted that ED 312 proposed adding guidance paragraphs to AASB 1060 (proposed paragraphs 95A–95E – corresponding with paragraphs 117A–117E of AASB 101). Although the guidance might be helpful to users, the stakeholder was concerned that guidance paragraphs were not included in AASB 1060 originally and was also unsure whether all of the guidance in proposed paragraphs 95A–95E was necessary. They were also concerned that inclusion of proposed paragraphs 95A–95E might create an expectation that guidance paragraphs would be added to AASB 1060 routinely in the future; and
(b) one stakeholder suggested the Board consider whether certain paragraphs in AASB 1060 requiring accounting policy information for specific transactions and balances are necessary, as disclosure of this information is already required by AASB 1060 paragraph 95.[61] They also suggested that if the disclosure requirements were retained, it might be helpful for users of AASB 1060 if the Board clarified that the specific disclosures are required only where they are material to the financial statements.
BC11 The Board considered the feedback and decided:
(a) not to add proposed paragraphs 95A–95E to AASB 1060. When developing AASB 1060, the Board was aware that replacing certain Standards with sections in AASB 1060 also removed some of the guidance included in those Standards, where such guidance was also not included in the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs Standard). However, for the sake of maintaining the simplicity of the disclosure requirements in AASB 1060, the Board considered this to be preferable to considering on a case-by-case basis which guidance should be included and which could be omitted.[62] Whilst the Board was unable to follow the IASB approach in this case as the IFRS for SMEs Standard was last updated in 2015, on balance the Board considered that including the proposed guidance paragraphs in AASB 1060 was not necessary. The Board noted that AASB 1060 paragraph 2 permits an entity applying AASB 1060 to refer to other Australian Accounting Standards (including AASB 101) for guidance where necessary; and
(a) to clarify that the accounting policy disclosure requirements in AASB 1060 for specific transactions or balances apply only where the accounting policy information is material to the financial statements (i.e. the same basis as the general requirement to disclose accounting policy information in AASB 1060 paragraph 95). The Board considered that the clarification would be helpful to users of AASB 1060.
Effective date and early application
BC12 To ensure consistency between the amendments in this Standard and the amendments made in AASB 2021‑2, the Board decided that this Standard would be effective for annual periods beginning on or after 1 January 2023, with earlier application permitted.
Basis for Conclusions on AASB 2023-3
This Basis for Conclusions accompanies, but is not part of, AASB 1060. The Basis for Conclusions was originally published with AASB 2023-3 Amendments to Australian Accounting Standards – Disclosure of Non-current Liabilities with Covenants: Tier 2.
Introduction
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the bases for the key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
Reasons for proposing these amendments
BC2 The Board issued AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current in March 2020 and AASB 2022-6 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants in December 2022. These Standards amended AASB 101 Presentation of Financial Statements to improve the information an entity provides in its financial statements about liabilities arising from loan arrangements for which the entity’s right to defer settlement of those liabilities for at least twelve months after the reporting period is subject to the entity complying with conditions specified in the loan arrangement (often referred to as ‘covenants’). AASB 2022‑6 also amended an example in AASB Practice Statement 2 Making Materiality Judgements regarding assessing whether information about covenants is material for disclosure.
BC3 The amendments made by AASB 2020-1 and AASB 2022-6 principally affect the classification and disclosure of current and non-current liabilities for entities applying Tier 1 reporting requirements.[63] It is appropriate for the Board to consider making similar amendments to the Tier 2 Standard AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities to ensure consistency in the terminology and presentation requirements across Australian Accounting Standards.
Issue of Exposure Draft ED 323
BC4 The Board’s proposals with respect to the amendments finalised in this Standard were exposed for public comment in March 2023 through Exposure Draft ED 323 Disclosure of Non-current Liabilities with Covenants – Proposed Amendments to Tier 2.
BC5 The significant issues considered by the Board in developing ED 323 are addressed in the following section.
Relevance of the amendments to AASB 1060
BC6 The AASB For-Profit Entity Standard-Setting Framework and the AASB Not-for-Profit Entity Standard-Setting Framework outline the approach adopted by the Board for considering whether to add to or amend disclosure requirements in AASB 1060 when the IASB makes amendments to full IFRS Standards.
BC7 Applying this approach, ED 323 proposed that in relation to the amendments made by AASB 2020-1 and AASB 2022-6 to AASB 101:
(a) where AASB 1060 contains a corresponding paragraph, AASB 1060 should be updated in a similar manner. If the corresponding paragraph in AASB 1060 (paragraph 40) is not updated, entities may interpret and apply the requirements of AASB 1060 differently from the corresponding requirements in AASB 101;
(b) AASB 1060 should be updated in relation to the new disclosure requirements added to AASB 101 if the disclosure is of particular relevance in the Australian environment or addresses a matter of public policy since the amendments to AASB 101 do not introduce significant recognition and measurement differences. The rationale for proposing to add paragraph 47A to AASB 1060 is further detailed in paragraph BC8; and
(c) where guidance paragraphs were added to AASB 101, these paragraphs should not be added to AASB 1060. When developing AASB 1060, the Board was aware that replacing certain Standards with sections in AASB 1060 also removed some of the guidance included in those Standards, where such guidance was also not included in the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs Standard). However, to maintain the simplicity of the disclosure requirements in AASB 1060, the Board considered this preferable to considering on a case-by-case basis which guidance should be included and which could be omitted.[64] Although the Board was unable to follow that approach in this case as the IFRS for SMEs Standard was last updated by the IASB in 2015, prior to the 2020 and 2022 amendments, on balance the Board considered that including the additional guidance paragraphs in AASB 1060 was not necessary. The Board noted that AASB 1060 paragraph 2 permits an entity applying AASB 1060 to refer to the guidance in other Australian Accounting Standards (including AASB 101) when helpful.
BC8 When applying the approach outlined in paragraph BC7(b) to proposed paragraph 47A (corresponding to AASB 101 paragraph 76ZA(a)), the Board considered that the disclosures would provide useful information to the users of Tier 2 financial statements because it would allow them to understand the nature of the entity’s covenants and the risk that a liability classified as non-current could nonetheless be repayable within twelve months. The Board considers that users of the financial statements of Tier 2 entities are particularly interested in information about an entity’s short-term cash flows and obligations, commitments, or contingencies, whether or not recognised as liabilities, and liquidity and solvency.[65]
BC9 No changes to AASB 1060 were proposed in relation to the amendments made to AASB Practice Statement 2. This is because AASB Practice Statement 2 provides non-mandatory guidance to all entities on making materiality judgements when preparing general purpose financial statements in accordance with Australian Accounting Standards. AASB 1060 does not include any guidance corresponding explicitly with that in AASB Practice Statement 2.
Finalisation of ED 323 proposals
BC10 Following the consultation period, and after considering the comments received, the Board decided to proceed with issuing this Standard, with minimal changes from the proposals in ED 323.
Feedback from respondents on ED 323
BC11 The Board received four formal comment letters on ED 323 and informal feedback from targeted outreach activities. The feedback received indicated that, in general, all respondents were supportive of the proposals. However, some respondents provided additional feedback:
(a) one stakeholder suggested the Board consider including in AASB 1060 certain guidance paragraphs that had been added to AASB 101. In their view, paragraphs 72B and 75A of AASB 101 provide the most useful guidance for preparers when determining whether a liability is current or non-current. The stakeholder was concerned that if these guidance paragraphs were not included in AASB 1060, Tier 2 entities might not be aware of the useful guidance or would have to refer to AASB 101 for the guidance; and
(b) one stakeholder suggested the Board reconsider the proposed amendments to paragraph 40(d) and relocate the statement about counterparty equity conversion options to a separate paragraph. In their view, the amendment proposed to paragraph 40(d) in ED 323 implied that the statement is relevant to paragraph 40(d) but not to paragraphs 40(a) and 40(c). They considered that the amendment proposed in ED 323 would be inconsistent with the amendments made to AASB 101, which relocated the statement about counterparty conversion options to a separate paragraph, paragraph 76B.
BC12 The Board considered the feedback and decided:
(a) not to add the guidance contained in paragraphs 72B and 75A of AASB 101 to AASB 1060. The Board confirmed its view that guidance paragraphs added to AASB 101 should not be added to AASB 1060; and
(b) to relocate the statement about counterparty conversion options from paragraph 40(d) to a new paragraph, paragraph 41A, for consistency with the amendments made to AASB 101.
Effective date
BC13 To ensure consistency between the amendments in this Standard for Tier 2 reporting requirements and the amendments made in AASB 2020‑1 and AASB 2022-6 for Tier 1 reporting requirements, the Board decided that this Standard would be effective for annual periods beginning on or after 1 January 2024, with earlier application permitted.
Basis for Conclusions on AASB 2023-4
This Basis for Conclusions accompanies, but is not part of, AASB 1060. The Basis for Conclusions was originally published with AASB 2023-4 Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two Model Rules: Tier 2 Disclosures.
BC1 This Basis for Conclusions summarises the Australian Accounting Standards Board’s considerations in reaching the conclusions in this Standard. It sets out the reasons why the Board developed the Standard, the approach taken to developing the Standard and the bases for the key decisions made. In making decisions, individual Board members gave greater weight to some factors than to others.
Pillar Two model rules
BC2 In October 2021 more than 135 jurisdictions agreed to the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting’s Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. Since then, the OECD has published model rules and other documents related to the second pillar of this solution (the Pillar Two model rules). The Pillar Two model rules provide a template that jurisdictions can translate into domestic tax law and implement as part of an agreed common approach.
BC3 The model rules:
(a) aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate;
(b) would achieve that aim by applying a system of top-up taxes that results in the total amount of taxes payable on “excess profit” in each jurisdiction representing at least the minimum rate of 15%; and
(c) typically require the ultimate parent entity of a group to pay top-up tax – in the jurisdiction in which it is domiciled – on profits of its subsidiaries that are taxed below 15%.
BC4 The rules are aimed at multinational groups with revenue in their consolidated financial statements exceeding €750 million in at least two of the four preceding fiscal years. The rules specify inclusion thresholds for some jurisdictions and exclude some types of entities from their scope.
Potential implications for income tax accounting
BC6 The mandatory temporary exception and related disclosures noted in paragraph BC5 apply to both Tier 1 and Tier 2 entities.[66]
BC7 However, to ensure Tier 2 entities are required to comply with disclosure requirements set out in AASB 1060 rather than the new requirements in AASB 112, the Board proposed to amend Appendix A of AASB 112 to extend the exemption from compliance with the disclosure requirements of AASB 112 for entities applying AASB 1060 to include the disclosure requirements added to AASB 112 by AASB 2023-2.
BC8 In considering whether to propose amendments to AASB 1060 to require targeted disclosures by Tier 2 entities, the Board considered that the Pillar Two model rules could have a material effect on the financial statements of Tier 2 entities. For example, some subsidiaries of large multinational groups may be affected by Pillar Two legislation.[67]
BC9 The Board’s proposals with respect to the amendments finalised in this Standard were exposed for public comment in July 2023 through Exposure Draft ED 325 International Tax Reform – Pillar Two Model Rules: Tier 2 Disclosures.
BC10 The significant issues considered by the Board in developing ED 325 are addressed in the following section.
Relevance of the amendments to AASB 1060
BC11 The AASB For-Profit Entity Standard-Setting Framework and the AASB Not-For-Profit Entity Standard-Setting Framework outline the approach adopted by the Board for considering whether to add to or amend disclosure requirements in AASB 1060 when the IASB makes amendments to full IFRS Standards.
BC12 The standard-setting frameworks first consider whether the amendments introduce a significant recognition and measurement difference between full IFRS Standards and the IFRS for SMEs Standard. If they don’t, the standard-setting frameworks state that no further action is required unless:
(a) the disclosures address a matter of public policy;
(b) the disclosures are of particular relevance in the Australian environment; or
(c) the amendments clarify or reduce existing disclosure requirements in full IFRS Standards.
BC13 In addition to the principles in the standard-setting frameworks, the Board acknowledged when finalising AASB 1060 that a review of the disclosures in AASB 1060 would need to take place any time the IFRS for SMEs Standard is updated (paragraph BC96).
BC14 Although there will be no recognition and measurement differences between full IFRS Standards and the IFRS for SMEs Accounting Standard or between Tier 1 and Tier 2 entities in Australia in respect of Pillar Two income taxes, the Board considers that Tier 2 entities applying the mandatory temporary exception should be required to include some disclosures in their financial statements to help users understand the effect of Pillar Two legislation on the financial statements.
BC15 In addition, the Board noted that the IASB proposed amendments to the IFRS for SMEs Standard, issuing Exposure Draft IASB/ED/2023/3 International Tax Reform – Pillar Two Model Rules – Proposed amendments to the IFRS for SMEs Standard in June 2023. IASB/ED/2023/3 proposes amendments to the IFRS for SMEs Standard that would:
(a) introduce a temporary exception to accounting for deferred taxes arising from the implementation of the Pillar Two model rules;
(b) introduce targeted disclosure requirements in periods when Pillar Two legislation is in effect; and
(c) clarify that ‘other events’ in the disclosure objective for income tax include enacted or substantively enacted Pillar Two legislation.
BC16 Therefore, the Board decided to propose amendments to AASB 1060 to require Tier 2 entities applying the temporary exception to include targeted disclosures in their financial statements.
Disclosures
BC17 As noted in paragraph BC6, a Tier 2 entity is required to apply the mandatory temporary exception to accounting for deferred taxes arising from the implementation of the Pillar Two model rules in AASB 112. To make the application of the exception transparent, the Board proposed requiring Tier 2 entities applying the temporary exception to disclose that fact.
BC18 In addition, consistent with the IASB’s proposed approach to amending the IFRS for SMEs Standard, the Board decided:
(a) in relation to periods before relevant Pillar Two legislation is in effect, not to propose specific disclosure requirements; and
(b) in relation to periods when relevant legislation is in effect, to propose requiring an entity to disclose its current tax expense (income) related to Pillar Two income taxes.
BC19 In making these decisions, the Board considered that:
(a) it was not necessary to add a new disclosure requirement for periods before relevant Pillar Two legislation is in effect because the existing disclosure requirement in paragraph 176 would be expected to result in Tier 2 entities affected by Pillar Two legislation providing some information about the nature and financial effect of enacted or substantively enacted Pillar Two legislation before it applies. However, the Board decided to propose clarifying that the reference in paragraph 176 to ‘other events’ includes enacted or substantively enacted Pillar Two legislation; and
(b) requiring a Tier 2 entity to disclose its current tax expense (income) related to Pillar Two income taxes when relevant legislation is in effect would help users of the financial statements understand the magnitude of Pillar Two income taxes relative to the entity’s overall tax expense (income). The Board considered this disclosure would not be costly to prepare because a Tier 2 entity would already be required in these circumstances to recognise current tax related to Pillar Two income taxes.
BC20 Following the consultation period, and after considering the comments received, the Board decided to proceed with issuing this Standard, with minimal changes from the proposals in ED 325.
Feedback from respondents on ED 325
BC21 The Board received two formal comment letters on ED 325. The feedback received indicated that, in general, both stakeholders were supportive of the proposals. However, one stakeholder provided additional feedback.
BC22 The stakeholder suggested that the proposed clarification to paragraph 176 was not necessary because it is already understood that the “transactions and other events” referred to in paragraph 176 include the enactment or substantive enactment of tax rates and laws. They also suggested that if the Board is concerned that this may not be the case, the clarification should be worded more broadly than specifically referring to Pillar Two legislation, or else the Board could consider clarifying this in the Basis for Conclusions.
BC23 The Board considered this feedback, along with feedback received by the IASB on IASB/ED/2023/3 and decided to generalise the wording of the clarification to paragraph 176 and refer to the Pillar Two legislation as an example.
BC24 The Board decided that the amendments should be made effective for annual periods beginning on or after 1 January 2023 that end on or after 30 September 2023, with earlier application permitted, as proposed in ED 325. This is consistent with the effective date of AASB 2023-2 for most entities.
BC25 The Board noted the comment from one of the respondents to ED 325 that the proposed effective date could make Tier 2 entities unsure about the application of the amendments to certain periods, such as the 2022/23 financial year. The Board confirmed the proposed two-pronged effective date, which is required in this case to avoid any mandatory retrospective application to reporting periods that have ended prior to the Board making the Standard. The Board noted that an entity could elect to apply the amendments before their mandatory application date, for example to the 2022/23 financial year or any period ending before 30 September 2023.
[1] The term ‘Australian Accounting Standards’ refers to Standards (including Interpretations) made by the AASB that apply to any reporting period beginning on or after 1 January 2005. In this context, the term encompasses Australian Accounting Standards – Simplified Disclosures, which some entities are permitted to apply in accordance with AASB 1053 Application of Tiers of Australian Accounting Standards in preparing general purpose financial statements.
[2] Corresponding AASB Standard: AASB 101 Presentation of Financial Statements.
[3] Corresponding AASB Standard: AASB 101 Presentation of Financial Statements.
[4] Corresponding AASB Standard: AASB 101 Presentation of Financial Statements.
[5] Corresponding AASB Standard: AASB 101 Presentation of Financial Statements.
[6] Corresponding AASB Standard: AASB 107 Statement of Cash Flows.
[7] Corresponding AASB Standard: AASB 101 Presentation of Financial Statements.
[8] Corresponding AASB Standards:
AASB 10 Consolidated Financial Statements;
AASB 12 Disclosure of Interests in Other Entities; and
AASB 127 Separate Financial Statements.
[9] Corresponding AASB Standard: AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors.
[10] Corresponding AASB Standards:
AASB 7 Financial Instruments: Disclosures;
AASB 9 Financial Instruments; and
AASB 139 Financial Instruments: Recognition and Measurement.
[11] Corresponding AASB Standards:
AASB 7 Financial Instruments: Disclosures;
AASB 9 Financial Instruments; and
AASB 139 Financial Instruments: Recognition and Measurement.
[12] Corresponding AASB Standard: AASB 102 Inventories.
[13] Corresponding AASB Standards:
AASB 12 Disclosure of Interests in Other Entities; and
AASB 128 Investments in Associates and Joint Ventures.
[14] Corresponding AASB Standards:
AASB 11 Joint Arrangements;
AASB 128 Investments in Associates and Joint Ventures; and
AASB 12 Disclosure of Interests in Other Entities.
[15] Corresponding AASB Standard: AASB 140 Investment Property.
[16] Corresponding AASB Standards:
AASB 116 Property, Plant and Equipment: and
AASB 140 Investment Property.
[17] Corresponding AASB Standard: AASB 138 Intangible Assets.
[18] Corresponding AASB Standard: AASB 3 Business Combinations.
[19] Corresponding AASB Standard: AASB 16 Leases.
[20] Corresponding AASB Standard: AASB 137 Provisions, Contingent Liabilities and Contingent Assets.
[21] Corresponding AASB Standard: AASB 15 Revenue from Contracts with Customers.
[22] Corresponding AASB Standard: AASB 120 Accounting for Government Grants and Disclosure of Government Assistance.
[23] Corresponding AASB Standard: AASB 123 Borrowing Costs.
[24] Corresponding AASB Standard: AASB 2 Share-based Payment.
[25] Corresponding AASB Standards:
AASB 102 Inventories;
AASB 116 Property, Plant, and Equipment;
AASB 136 Impairment of Assets; and
AASB 138 Intangible Assets.
[26] Corresponding AASB Standard: AASB 119 Employee Benefits.
[27] Corresponding AASB Standard: AASB 112 Income Taxes.
[27A] ‘Pillar Two legislation’ refers to tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules. Income taxes arising from Pillar Two legislation are hereafter referred to as ‘Pillar Two income taxes’.
[28] Corresponding AASB Standard: AASB 121 The Effects of Changes in Foreign Exchange Rates.
[29] Corresponding AASB Standard: AASB 129 Financial Reporting in Hyperinflationary Economies.
[30] Corresponding AASB Standard: AASB 110 Events after the Reporting Period.
[31] Corresponding AASB Standard: AASB 124 Related Party Disclosures.
[32] AASB 137 Provisions, Contingent Liabilities and Contingent Assets defines executory contracts as contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent.
[33] Corresponding AASB Standard: AASB 141 Agriculture.
[34] Corresponding AASB Standard: AASB 1 First-time Adoption of Australian Accounting Standards.
[35] Applies to government departments and other public sector entities that obtain part or all of their spending authority for the period from a parliamentary appropriation.
[36] AASB 1051 applies to general purpose financial statements of local governments, government departments and whole of governments, and financial statements of GGSs.
[37] AASB 1055 applies to whole of government general purpose financial statements of each government; financial statements of each government’s GGS; general purpose financial statements of each not-for-profit reporting entity within the GGS; and financial statements of each not-for-profit entity within the GGS that are, or are held out to be, general purpose financial statements.
[38] Corresponding AASB Standard: AASB 1004 Contributions.
[39] Corresponding AASB Standard: AASB 1004 Contributions.
[40] Corresponding AASB Standard: AASB 1050 Administered Items.
[41] Corresponding AASB Standard: AASB 1051 Land Under Roads.
[42] Corresponding AASB Standard: AASB 1055 Budgetary Reporting.
[43] Corresponding AASB Standard: AASB 1058 Income of Not-for-Profit Entities.
[44] Corresponding AASB Standard: AASB 1059 Service Concession Arrangements: Grantors.
[45] Definition of IFRSs amended after the name changes introduced by the revised Constitution of the IFRS Foundation in 2010.
[46] In January 2020, the IASB moved its Disclosure Initiative – Subsidiaries that are SMEs project to the standard-setting programme. The objective of the project is to develop a reduced disclosure IFRS Standard that would apply on a voluntary basis to subsidiaries that do not have public accountability.
[47] AASB 1053 Application of Tiers of Australian Accounting Standards, paragraphs 11-13
[48] See AASB Staff Paper Enhancing the revised Conceptual Framework and replacing Special Purpose Financial Statements – For-profit User and Preparer Survey Results.
[49] As per paragraph BC14 of ED 277, the level of adoption among other types of companies, including large proprietary companies was very low – with the likely reason being that the general level of disclosure under Tier 2 was still viewed as burdensome. A research paper (Potter, B., Tanewski, G., and Wright, S., 2016, Financial Reporting by Private Companies in Australia: Current Practice and Opportunities for Research, paper presented at the AASB Research Forum, November 24 2016, Sydney) on the financial reporting practices by a sample of large proprietary companies in Australia lodging annual financial statements with ASIC identified that:
(i) less than 10 percent of the total sample use Tier 2 disclosures; and
(ii) of those large proprietary companies sampled that prepare GPFS, around 20 percent use Tier 2 disclosures.
A subsequent analysis of financial reports of for-profit non-disclosing entities lodging financial statements with ASIC in 2018 confirmed that 71 percent of these entities were still lodging SPFS with ASIC, 13 percent lodged Tier 2 GPFS and 16 percent Tier 1.
[50] The IASB was guided by the broad principles set out in paragraph BC41, but also relied on the recommendations of a working group which undertook a comprehensive review of the disclosure proposals in the exposure draft, and the comments on those proposals in response to the exposure draft. In addition, the IASB received feedback from representatives of a number of German banks that lend extensively to small private entities and provided the IASB with a comprehensive report on disclosure needs from a bank lender’s perspective. See paragraphs BC44-BC47 and BC156-158 of the IFRS for SMEs Standard – Part B.
[51] In considering the feedback received on ITC 39, the AASB noted in February 2019 that while a minority of respondents had asked the Board to consider the IFRS for SMEs Standard as an option or alternative for Tier 2 GPFS, these respondents did not provide any new arguments as to whether the IFRS for SMEs Standard would be preferable to full R&M. The AASB further noted that the IFRS for SMEs Standard includes requirements for consolidated financial statements, deferred tax accounting, financial instruments accounting and related party disclosures that are not substantively different to full IFRS R&M requirements. For these reasons, the AASB decided not to propose a Tier 2 GPFS framework with differential R&M requirements as an option or alternative for Tier 2 GPFS for the for-profit sector. Further discussion of the Board’s consideration on this matter is available in AASB 2020-2 paragraphs BC99−BC107.
[52] As per paragraph BC46 of IFRS for SMEs Standard – Part B.
[53] See paragraph BC157 of IFRS for SMEs Standard – Part B.
[54] See AASB Discussion Paper: Improving Financial Reporting for Australian Charities
[55] See AASB Discussion Paper: Improving Financial Reporting for Australian Public Sector
[56] 2015 Amendments to the IFRS for SMEs, paragraph BC210-BC212
[57] ED 192 – Appendix C Analysis of Disclosure Requirements: Proposed Disclosures under RDR: AASB 116 Property, Plant and Equipment and IFRS for SMEs Section 17 Property, Plant and Equipment
[58] Coulton, J., C. Ruddock and S. Taylor, 2014, The Informativeness of Dividends and Associated Tax Credits, Journal of Business Finance and Accounting, Vol. 41, pp. 1309-1336
[59] IASB Request for Information Comprehensive Review of the IFRS for SMEs Standard – N1
[60] AASB 1053 Application of Tiers of Australian Accounting Standards outlines that Australian Accounting Standards consist of two tiers of reporting requirements for preparing general purpose financial statements:
(a) Tier 1: Australian Accounting Standards; and
(b) Tier 2: Australian Accounting Standards – Simplified Disclosures (for annual periods beginning on or after 1 July 2021).
[61] For example, AASB 1060 paragraphs 123, 125, 129, 160, 163 and 221 require disclosure of accounting policy information for specific transactions and balances.
[62] AASB 1060 paragraph BC55.
[63] AASB 1053 Application of Tiers of Australian Accounting Standards outlines that Australian Accounting Standards consist of two tiers of reporting requirements for preparing general purpose financial statements:
(a) Tier 1: Australian Accounting Standards; and
(b) Tier 2: Australian Accounting Standards – Simplified Disclosures.
[64] AASB 1060 paragraph BC55.
[65] AASB 1060 paragraph BC41.
[66] AASB 1053 Application of Tiers of Australian Accounting Standards outlines that Australian Accounting Standards consist of two tiers of reporting requirements for preparing general purpose financial statements:
(a) Tier 1: Australian Accounting Standards; and
(b) Tier 2: Australian Accounting Standards – Simplified Disclosures.
[67] ‘Pillar Two legislation’ refers to tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co-operation and Development (OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules. Income taxes arising from Pillar Two legislation are hereafter referred to as ‘Pillar Two income taxes’.