AASB 1053

The objective of this Standard is to set out the application of Tiers of Australian Accounting Standards to different categories of entities preparing general purpose financial statements.

AusCF entities are:

(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).

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 are set out in paragraph Aus1.1 of the Conceptual Framework.

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This Standard applies to annual reporting periods beginning on or after 1 July 2013.

[Note: For application dates of paragraphs changed or added by an amending Standard, see Compilation Details.]

This Standard may be applied to annual reporting periods beginning on or after 1 July 2009 but before 1 July 2013. When an entity applies this Standard to such an annual reporting period it shall disclose that fact.

When an entity elects to early adopt this Standard for an annual reporting period beginning on or after 1 July 2009 but before 1 July 2013 and prepares Tier 2 general purpose financial statements, it shall also adopt the relevant Standards that specify Tier 2 reporting requirements.

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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.

Tier 1 incorporates International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) and include requirements that are specific to Australian entities.

Tier 2 comprises the recognition and measurement requirements of Tier 1 (including consolidation and the equity method of accounting) but substantially reduced disclosure requirements. Except for the presentation of a third statement of financial position under Tier 1^[1] and the option of not presenting a statement of changes in equity^[2], the presentation requirements under Tier 1 and Tier 2 are the same. Tier 2 disclosure requirements are set out in AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities.

Each Australian Accounting Standard specifies the entities to which it applies and, where necessary, sets out disclosure requirements from which Tier 2 entities are exempt.

The following types of entities shall prepare general purpose financial statements that comply with Tier 1 reporting requirements:

(a) 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

(b) the Australian Government and State, Territory and Local Governments.

Subject to AASB 1049, GGSs of the Australian Government and State and Territory Governments shall apply Tier 1 reporting requirements.

Tier 2 reporting requirements shall, as a minimum, apply to the general purpose financial statements of the following types of entities:

(a) for-profit private sector entities that do not have public accountability;

(b) not-for-profit private sector entities; and

(c) public sector entities, whether for-profit or not-for-profit, other than the Australian Government and State, Territory and Local Governments.

These types of entities may elect to apply Tier 1 reporting requirements in preparing general purpose financial statements.

Entities applying Tier 2 reporting requirements would not be able to state compliance with IFRSs.

Whilst Tier 2 reporting requirements are available under this Standard for general purpose financial statements of non-publicly accountable for-profit private sector entities, not-for-profit private sector entities and public sector entities (both for-profit or not-for-profit) other than those required to apply Tier 1 reporting requirements, regulators might exercise a power to require the application of Tier 1 reporting requirements.

Disclosures under Tier 2 reporting requirements are the minimum disclosures required to be included in general purpose financial statements. Entities may include additional disclosures using Tier 1 reporting requirements as a guide if, in their judgement, such additional disclosures are consistent with the objective of general purpose financial statements.

Entities adopting Tier 2 reporting requirements for the first time that apply AASB 1 shall comply with the simplified disclosures under AASB 1060 paragraphs 206–213, including for the purposes of paragraphs 18A(a) and 18A(b).

When applying Tier 1 reporting requirements for the first time, an entity that prepared its most recent previous financial statements in the form of special purpose financial statements shall apply all the relevant requirements of AASB 1.

When applying Tier 2 reporting requirements for the first time, an entity that prepared its most recent previous financial statements in the form of special purpose financial statements:

(a) without applying, or only selectively applying, applicable recognition and measurement requirements of Australian Accounting Standards, including, if a parent entity, without presenting consolidated financial statements prepared in accordance with AASB 10 Consolidated Financial Statements (unless exempt), shall apply either:

(i) all the relevant requirements of AASB 1; or

(ii) Tier 2 reporting requirements directly using the requirements in AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors;

(b) without presenting consolidated financial statements, on the basis that neither the parent nor the group was a reporting entity (as defined in AASB 1057), shall apply either:

(i) all the relevant requirements of AASB 1; or

(ii) Tier 2 reporting requirements directly using the requirements in AASB 108; and

(c) applying all applicable recognition and measurement requirements of Australian Accounting Standards, including, if a parent entity, presenting consolidated financial statements prepared in accordance with AASB 10 (unless exempt), shall not apply AASB 1.

An entity applying paragraph 18A(c) continues applying the applicable recognition and measurement requirements of Australian Accounting Standards, whether it had previously initially applied recognition and measurement requirements consistent with AASB 1 or a predecessor to AASB 108, whichever was applicable at the time.

Entities that are applying AASB 1060 shall provide the disclosures required under AASB 1060 paragraphs 206–213 if they are applying paragraph 18A(a)(i) or 18A(b)(i), or the disclosures required under AASB 1060 paragraphs 106–110 if they are applying paragraphs 18A(a)(ii) or 18A(b)(ii), instead of the disclosures required under AASB 1 or AASB 108.

Paragraph 18A(a) addresses where an entity has not applied, or only selectively applied, applicable recognition and measurement requirements, rather than whether the entity had made an explicit and unreserved statement of compliance with such requirements. As such, if an entity becomes aware it had claimed compliance with applicable recognition and measurement requirements of Australian Accounting Standards in error in its most recent previous special purpose financial statements, the entity applies paragraph 18A(a).

Subject to paragraphs 19A and 21, an entity that:

(a) has applied Tier 1 reporting requirements or IFRSs in a previous reporting period; but

(b) whose most recent previous annual financial statements did not contain an explicit and unreserved statement of compliance with Tier 1 reporting requirements^[3] or IFRSs; and

(c) is resuming or commencing the application of Tier 1 reporting requirements;

shall apply all the relevant requirements of AASB 1, or the AASB 1 option for retrospective application of Australian Accounting Standards in accordance with AASB 108 as if the entity had never stopped applying Australian Accounting Standards or IFRSs.

An entity that is to claim IFRS compliance on resuming Tier 1 reporting requirements under paragraph 19, shall not use the AASB 1 option for retrospective application of Australian Accounting Standards in accordance with AASB 108 if it was not previously IFRS compliant.

Subject to paragraph 23, an entity that:

(a) has applied Tier 2 reporting requirements^[4] in a previous reporting period; but

(b) whose most recent previous annual financial statements did not contain an explicit and unreserved statement of compliance with Tier 2 reporting requirements^[5]; and

(c) is resuming the application of Tier 2 reporting requirements;

shall:

(d) apply all the relevant requirements of AASB 1, or the AASB 1 option for retrospective application of Australian Accounting Standards in accordance with AASB 108 as if the entity had never stopped applying Tier 2 reporting requirements, if the entity did not apply all applicable recognition and measurement requirements of Australian Accounting Standards; or

(e) not apply AASB 1, or the AASB 1 option for retrospective application of Australian Accounting Standards in accordance with AASB 108, if the entity applied all applicable recognition and measurement requirements of Australian Accounting Standards.

Entities described in paragraph 19B(a)-(c) resume the application of Tier 2 reporting requirements effectively using the same approach as an entity would for first transitioning from special purpose financial statements to Tier 2 reporting requirements set out in paragraph 18A. Accordingly, an entity that did not comply with Tier 2 reporting requirements due solely to omitting some disclosures, but otherwise continued to apply all applicable recognition and measurement requirements, is prohibited from applying AASB 1 on returning to Tier 2 requirements. Instead, it continues applying applicable recognition and measurement requirements, whether it had previously initially applied AASB 1 or a predecessor to AASB 108, whichever was applicable at the time. However, if such an entity did not continue to apply all applicable recognition and measurement requirements of Australian Accounting Standards in its most recent previous annual financial statements, that entity is required to apply AASB 1, or the AASB 1 option for retrospective application of Australian Accounting Standards in accordance with AASB 108, on resuming the application of Tier 2 reporting requirements.

An entity transitioning from Tier 2 to Tier 1 shall:

(a) apply AASB 1^[6], if it is claiming compliance with IFRSs; and

(b) not apply AASB 1, if it is a not-for-profit entity not claiming compliance with IFRSs.

In relation to paragraph 21(a), entities claiming compliance with IFRSs (which would include for-profit entities applying Tier 1 reporting requirements) need to apply the relevant requirements of AASB 1. This is because, in previously applying Tier 2 reporting requirements, these entities have applied only some of the disclosure requirements of AASB 1 or were prohibited or exempted from applying AASB 1.

An entity transitioning from Tier 1 to Tier 2 shall not apply AASB 1.

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This appendix is an integral part of AASB 1053.

The following terms have the meanings specified:

General purpose 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.

Public accountability – an entity has public accountability if:

(a) its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or

(b) it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.

This appendix is an integral part of AASB 1053.

Public accountability is defined in Appendix A. The notion of public accountability is consistent with the notion adopted by the IASB in its International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). It is different from the notion of public accountability in the general sense of the term that is often employed in relation to not-for-profit, including public sector, entities.

The following for-profit entities are deemed to have public accountability:

(a) disclosing entities, even if their debt or equity instruments are not traded in a public market or are not in the process of being issued for trading in a public market;

(b) co-operatives that issue debentures;

(c) registered managed investment schemes;

(d) superannuation plans regulated by the Australian Prudential Regulation Authority (APRA) other than Small APRA Funds as defined by APRA Superannuation Circular No. III.E.1 Regulation of Small APRA Funds, December 2000; and

(e) authorised deposit-taking institutions.

Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organisations, co-operative enterprises requiring a nominal membership deposit and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable.

Examples of entities that hold assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses are most likely to include banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.

This appendix is an integral part of AASB 1053

This appendix sets out optional short-term exemptions for for-profit private sector entities applying AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities to periods beginning before 1 July 2022, as follows:

(a) relief from distinguishing the correction of errors and changes in accounting policy, for periods beginning before 1 July 2022 (see paragraph E3);

(b) relief from providing comparative information not previously disclosed in the notes, for periods beginning before 1 July 2021 (see paragraph E4); and

(c) relief from restating comparative information, for periods beginning before 1 July 2021 (see paragraphs E5–E7).

If an entity applies one or more of the exemptions set out in this appendix, it shall disclose that fact.

For periods beginning before 1 July 2022, notwithstanding AASB 1060 paragraph 211 (for entities applying AASB 1 First-time Adoption of Australian Accounting Standards to the period) and AASB 1060 paragraph 110 (for entities applying AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors instead of AASB 1), an entity applying paragraph 18A(a) or (b) need not distinguish the correction of errors and changes in accounting policies if the entity becomes aware of errors made in its most recent previous special purpose financial statements.

Notwithstanding AASB 1060 paragraph 20, entities that elect to apply AASB 1060 to periods beginning before 1 July 2021 (ie early application) need not present comparative information in the notes if the entity did not disclose the comparable information in its most recent previous financial statements.

Paragraphs E6–E7 apply to a for-profit private sector entity that elects to apply AASB 1060 to periods beginning before 1 July 2021 (ie early application) and also applies AASB 1 in preparing its first Australian-Accounting-Standards financial statements (Tier 2) for the period.

Notwithstanding AASB 1 paragraph 7, comparative information need not be restated in the entity’s first Australian-Accounting-Standards financial statements (Tier 2). Under this approach, references to the ‘date of transition to Australian Accounting Standards’ in AASB 1 shall mean the beginning of the first Australian-Accounting-Standards reporting period. Consequently, consistent with AASB 1 paragraph 11, the entity shall recognise adjustments arising from any differences between the carrying amounts in its previous special purpose financial statements and its opening carrying amounts based on the retrospective application of Australian Accounting Standards directly in retained earnings (or, if appropriate, another category of equity) at the beginning of the first Australian-Accounting-Standards reporting period.

An entity that elects to not restate comparative information in its first Australian-Accounting-Standards financial statements (Tier 2) in accordance with paragraph E6 need not provide the reconciliations required by AASB 1060 paragraphs 210(b) and (c). The entity shall:

(a) present two statements of financial position, two statements of profit or loss and other comprehensive income, two separate statements of profit or loss (if presented), two statements of cash flows and two statements of changes in equity and related notes, as follows:

(i) the statements and related notes as at the end of the first Australian-Accounting-Standards reporting period, compliant with Australian Accounting Standards; and

(ii) the statements and related notes presented in its most recent previous special purpose financial statements (not necessarily compliant with Australian Accounting Standards);

(b) disclose a reconciliation of its equity presented in its most recent previous special purpose financial statements to its equity determined in accordance with Australian Accounting Standards – Simplified Disclosures at the date of transition to Australian Accounting Standards – Simplified Disclosures;

(c) disclose a description of the main adjustments that would have been required to make the comparative statement of profit or loss and other comprehensive income and separate statement of profit or loss (if presented) compliant with Australian Accounting Standards. The entity need not quantify those adjustments; and

(d) prominently label the comparative information that is not compliant with Australian Accounting Standards as such.