Explore prevalent industry challenges impacting firms and gain insights from a panel of seasoned professionals on innovative strategies to effectively address these issues. […]
1 July Mandatory Adoption of Amended Accounting Standard
Emily Pritchard, current as of: 3 June 2021.
The Australian Accounting Standards Board has released an amended accounting standard that will change the reporting requirements of certain entities in the for-profit, private sector. AASB 2020-02 has a mandatory adoption date of 1 July 2021.
Certain private, for-profit entities will no longer be able to self-assess financial reporting requirements and prepare special purpose financial statements if their constituting documents (for example, trust deeds, SMSF trust deeds and partnership agreements) are created or amended after 1 July 2021 and require preparation of financial statements that comply with “Australian Accounting Standards.” Instead, general purpose financial statements will be required.
The amended standard applies to:
- constituting documents (trust deeds, partnership agreements, SMSF trust deeds etc) created after 1 July 2021; and
- constituting documents (trust deeds, partnership agreements, SMSF trust deeds etc) that were created before 1 July 2021 but amended after that date without removing the requirement to comply with “Australian Accounting Standards.”
Case study 1
- A partnership agreement is signed and dated 14 October 2021.
- The agreement requires that the financials of the partnership be prepared in compliance with “Australian Accounting Standards”.
Because the partnership agreement is signed after 1 July 2021, the effect of AASB 2020-02 would be that the partnership is required to prepare general purpose financial statements and will not have the flexibility to self-assess its reporting requirements and prepare special purpose financial statements.
Case study 2
- A discretionary trust was established on 21 November 2006.
- The original trust deed for that trust requires the trustee to prepare financial information in compliance with “Australian Accounting Standards”.
- In April 2022 the trust makes a finance application with a bank for the purpose of purchasing property.
- Prior to proceeding with the finance application, the bank requires that the trust deed for the trust be amended to insert additional powers of the trustee (to appoint an attorney and to act despite a conflict of interest).
- An amendment is prepared to insert the required powers into the trust deed. The amendment is signed and dated 12 May 2022. No other amendments are made to the trust deed.
Because the trust deed was amended after 1 July 2021, the effect of AASB 2020-02 is that the trustee no longer has the flexibility to self-assess the trust’s reporting requirements and prepare special purpose financial statements. Rather, because the requirement to comply with “Australian Accounting Standards” was maintained in the trust deed when the amendment was prepared, the trust would be required to prepare general purpose financial statements.
The Acis Legal team has reviewed the documents we provide to ensure they preserve maximum flexibility in relation to financial reporting. The review and implementation will be completed by 1 July in line with the mandatory adoption date.
Amendments to existing documentation
If amendments to existing documentation are made after 1 July 2021 (regardless of the purpose of those amendments), the reporting requirements of the entity contained in the existing documentation should be reviewed and, if required, amended at the same time. Amendments can be ordered through the Acis Legal team.
Feel free to contact the Acis Legal Services team with any queries.
Acis does not provide advice in relation to commercial law, taxation, duty, company law or any other matter. We do not purport to provide advice nor should you construe anything in any correspondence with us, or material provided by us, as advice of any kind.