Many for-profit entities currently preparing special purpose financial statements (SPFS) are looking to transition early to general purpose financial statements (GPFS), and in particular, Simplified Disclosures (i.e. for years ending 30 June 2021) in order to take advantage of the relief available from having to restate comparatives in certain circumstances.
There are two broad categories of for-profit entities that cannot get relief from restating comparatives in their first Simplified Disclosure financial statements (if early adopted for 30 June 2021):
All recognition and measurement previously applied
Entities that previously applied all the recognition and measurement requirements of AAS (including preparing consolidated financial statements, if applicable for a group) must present comparatives in their first GPFS Simplified Disclosures financial statements (paragraph 38 of AASB 101 Presentation of Financial Statements). Also, there is no exemption from restating comparatives because the previous period financial statements have been prepared in accordance with AAS.
Financial statements not required in previous period
Where financial statements were not required for the previous period, there is no relief from restatement because there were no comparatives in the first place. Practically such entities will have to prepare an opening balance sheet on 1 July 2019, and recognise and measure all transactions and balances from this date in accordance with AAS. In addition, the financial statements for the comparative period ended 30 June 2020 will have to be prepared and presented. However, the opening balance sheet on 1 July 2019 is not required to be presented in the 30 June 2021 financial statements.
The table below shows examples of when relief is available from restating comparatives on early adoption of GPFS Simplified Disclosures (i.e. for 30 June 2021 year-ends), as well as what comparatives for 30 June 2020 will look like and the additional transitional disclosures required:
Scenario | Comparatives for 30 June 2020 will be … | Additional transitional disclosures |
An individual entity did not apply all the recognition and measurement requirements of AAS in its most recent previous SPFS | Previous SPFS:
| Reconciliation of equity:
Describe the main adjustments that would have been required to make the comparative statement of profit or loss and other comprehensive income compliant with AAS (no quantification required). |
A parent entity in a group previously prepared consolidated financial statements but did not apply all the recognition and measurement requirements of AAS in its most recent previous consolidated SPFS | Previous consolidated SPFS:
| Reconciliation of consolidated equity:
Describe the main adjustments that would have been required to make the comparative consolidated statement of profit or loss and other comprehensive income compliant with AAS (no quantification required). |
A parent entity in a group is preparing consolidated financial statements for the first time in accordance with AASB 10 Consolidated Financial Statements. The parent entity SPFS for the previous period complied with all the recognition and measurement requirements in AAS. | Previous parent entity SPFS:
| Reconciliation of equity:
Explain that the main adjustments that would have been required to make the statement of profit or loss and other comprehensive income for the parent into a consolidated one, would be to include the results of the subsidiaries for the year ended 30 June 2020 (no quantification required). |
Navigating the new GPFS Simplified Disclosure requirements, particularly on transition, is a time-consuming and complex exercise. Many entities that previously prepared SPFS may think that they complied with all recognition and measurement requirements of AAS, but may not have in all respects. As noted in the above article, understanding the extent of compliance with recognition and measurement is key to determining what relief, if any, is available on transition with respect to restating comparatives and adding extra disclosures in the comparative notes for new Simplified Disclosures. Please contact BDO’s IFRS Advisory team if you need help getting GPFS Ready.