AASB 1054 - Australian Additional Disclosures - May 2011

The Standard introduces several interlocking concepts and rules. First, reporting framework disclosure. The Standard imports paragraphs 8 and 9 of AASB 1054 to require entities within scope to disclose the reporting framework under which their financial statements are prepared and whether those statements are SPFS or GPFS (BC40). The Board considered these disclosures minimal cost because the information is expected to be readily available and because the disclosures underpin the remaining R&M compliance disclosures (BC40).

Second, the two-step R&M compliance disclosure. The Board requires entities to identify material accounting policies that do not comply with AAS R&M requirements (step one, paragraph 9C(e)) and then to declare whether, overall, the financial statements comply with all R&M requirements in AAS (step two, paragraph 9C(f)). The two‑step approach is intended to limit preparation burden by focusing analysis on material accounting policies first; if none are non‑compliant then the entity may simply state overall compliance (BC44). The Board rejected an option that would allow entities to state they had not assessed compliance for particular AAS requirements (no ‘not assessed’ box), on the basis that the Board had not identified new arguments to justify such an option and that deferral of the effective date would give entities time to perform assessments (BC45, BC52).

Third, scope and targeted application. The Standard applies only to a narrow set of for‑profit private sector entities that are required only by constituting or other documents to comply with AAS, provided the document was created before 1 July 2021 and not amended on/after that date (BC36). The Standard excludes for‑profit private sector entities that are required by law to comply with AAS or accounting standards , those entities were handled in AASB 2020‑2 and were explicitly excluded from this Standard to avoid short‑term application anomalies and to allow time for transitioning to GPFS (BC34, BC38-BC39). The Board also declined to extend the Standard to entities that voluntarily prepare SPFS or that reference ‘GAAP’ or ‘true and fair’ without specifying AAS, consistent with prior application‑paragraph decisions (BC37).

Fourth, treatment of group relationships and joint arrangements. The Board considered and settled on the following: it is not necessary to require an explicit statement that the entity has no subsidiaries or investments in associates/joint ventures (BC43). The Standard does not exclude joint operations from the R&M disclosure requirement; the Board explained that AASB 11 requires joint operators to recognise their share of assets, liabilities, revenue and expenses in a manner that is clearly an R&M requirement, so joint operations fall within the R&M assessment (BC41-BC42). The Board therefore requires disclosures to address joint operation policies as R&M matters.

Fifth, limited scope with respect to disclosure omissions. The Board considered, and rejected, expanding the Standard to require SPFS to identify AAS where the entity had elected to omit material disclosures that would otherwise appear in GPFS (for example, omitting related‑party disclosures under AASB 124). The Board described omitted‑disclosure matters as beyond the scope of this project and outside the objective of improving transparency regarding compliance with R&M requirements (BC46).

Sixth, the Standard does not change R&M rules. The Board emphasised the amendments do not require entities to change their accounting policies or to perform additional recognition and measurement work beyond assessing whether existing policies comply with AAS R&M requirements (BC62). The disclosures are to be based on the entity’s existing financial reporting policies and practices.

Seventh, operative timing and transitional considerations. The Board originally proposed various effective dates, considered stakeholder feedback about cost and timing (especially given the COVID‑19 pandemic), deferred operative dates for some entities, and allowed early voluntary adoption. The Basis for Conclusions traces these timing decisions and the Board’s rationale (BC31‑BC39, BC51‑BC53, BC63). The compiled standard states application to annual periods beginning on or after 1 January 2023.

Eighth, standard‑setting and enforcement boundaries. The Board positioned the Standard as consistent with its For‑Profit Entity Standard‑Setting Framework, noting the AASB does not set R&M for SPFS but can require limited disclosures. Enforcement of preparation and compliance with Accounting Standards is the responsibility of other regulators, not the AASB (BC47-BC50).

Each of these concepts governs who must disclose what, under what timetable, and with what practical assessment steps to identify material non‑compliances.

The Standard targets a defined subset of entities that prepare SPFS. The primary class affected are for‑profit private sector entities that are required only by their constituting document or another document to prepare financial statements that comply with AAS, provided the relevant constituting or other document was created before 1 July 2021 and has not been amended on or after that date (BC36). The Board identified that some such entities may have historically had ambulatory references to AAS in constituting documents without appreciating the implications; the Standard therefore focuses on contextual disclosures rather than mandating a full transition to GPFS for these entities (BC49).

Excluded categories are explicit. Entities that are required by legislation to prepare financial statements that comply with AAS or accounting standards are not within the scope of this Standard. The Board excluded these entities because AASB 2020‑2 addressed their reporting framework and because an earlier effective date would have created a short‑term application anomaly and extra burden during the pandemic (BC34, BC38-BC39). Not‑for‑profit private sector entities that were already within the previous AASB 1054 scope are referenced in the comparison with AASB 2019‑4, but the present Standard’s scope expands coverage to certain for‑profit private sector entities that were not previously within the application paragraphs (BC40).

Entities outside scope include those that voluntarily prepare SPFS or those that are required by a constituting or other document to present a ‘true and fair view’ or comply with ‘GAAP’ where those terms are not explicitly defined as AAS. The Board considered broadening scope to these entities but rejected that change for the same reasons it declined to include them in application paragraphs of other AAS (BC37).

Other specific categories and situations the Board addressed:

• Joint operations: included within the R&M disclosure requirement because AASB 11 requires joint operators to account for their share of assets and liabilities in a manner that is an R&M requirement (BC41-BC42).
• Entities with no subsidiaries, associates or joint ventures: the Standard does not require an explicit statement that such relationships do not exist; absence of the related disclosures will normally allow users to infer there are none (BC43).
• Entities that lodge SPFS on the public record but whose constituting documents impose an AAS requirement: the Board identified these as a target because public lodging without clear R&M disclosures could mislead users (BC36).

The Board also noted particular industry examples anecdotally, such as securitised trading trusts, that may lie in the scope and lodge SPFS on the public record (BC36). The Board received varied stakeholder feedback on cost and implementation effort, with some respondents warning implementation costs could exceed benefits for certain for‑profit entities (BC32).

Who pays and who decides. Entities preparing SPFS within scope must undertake the work to assess R&M compliance and prepare the new disclosures; the AASB decided the disclosure requirements; enforcement and any regulatory consequences are left to other regulators, not the AASB (BC50).

Duties imposed by the Standard are disclosure duties rather than changes to recognition and measurement rules. Key duties are:

• Reporting framework disclosure: Entities within scope must disclose the reporting framework used and whether the financial statements are SPFS or GPFS, consistent with paragraphs 8 and 9 of AASB 1054 (BC40). The Board expects this information to be readily available to entities and to be necessary to explain the basis of accounting to users (BC40).

• Two‑step R&M compliance disclosure: Entities must:

  1. Identify and disclose each material accounting policy that does not comply with the R&M requirements in AAS (paragraph 9C(e) as referenced at BC44). That requires an assessment of material policies against AAS R&M requirements.
  2. Make an overall statement regarding whether the financial statements comply with all R&M requirements in AAS, other than for AASB 10 and AASB 128 which are treated in the two‑step process as exceptions in the Board’s deliberations (BC44). Paragraph 9C(f) is intended to inform users where the financial statements overall do comply, as well as to make clear where overall non‑compliance exists (BC44).

• Joint operation accounting policy disclosure: Where relevant, accounting policies for joint operations are subject to the same R&M disclosure obligations because AASB 11 requires recognition of the entity’s share of assets, liabilities, revenue and expenses consistent with R&M requirements (BC41-BC42).

• Basis of decision to prepare SPFS: The entity must disclose the basis on which the decision to present SPFS was made (paragraph 9C(a) is referenced at BC40), and the Board noted that making this disclosure requires consideration of the reporting framework (BC40).

Rights and limits:

• No change to R&M recognition: Entities are not required to change accounting policies or perform additional R&M calculations; disclosures are to be based on existing policies and practices (BC62). This is stated as limiting immediate cost and operational disruption.

• No ‘not assessed’ option: Entities do not have the option to state that they have not assessed compliance with certain AAS requirements; the Board rejected this on policy grounds and deferred effective dates to provide time to perform the assessment if necessary (BC45, BC51-BC53).

• Early adoption permitted: The Board allows earlier voluntary disclosure and earlier application (BC63, BC51). This is a right to adopt sooner than the operative date.

• No requirement to disclose omitted AAS disclosures: The Standard does not require entities to identify AAS where they have elected to omit material disclosures that would feature in GPFS (BC46).

• Enforcement and oversight: The AASB does not have enforcement authority over compliance; enforcement responsibilities remain with other regulators (BC50). The Board’s role is standard setting and specifying disclosures, not enforcing them.

Practical duties flow from these rights and constraints: entities must review their constituting documents for pre‑1 July 2021 AAS references, identify material policies, compare them to AAS R&M requirements, and prepare the specified disclosures. The Board emphasised a proportionate approach by allowing the two‑step assessment to limit burden where material policies are compliant (BC44).

The compiled Standard and the associated Basis for Conclusions do not themselves specify statutory penalties or prescribe an AASB enforcement regime. The AASB explicitly states enforcement of the preparation of financial statements and compliance with Accounting Standards is the responsibility of other regulators and not the AASB (BC50, citing paragraph 18 of the AASB For‑Profit Entity Standard‑Setting Framework). In other words, the Standard imposes disclosure obligations as an accounting standard; any penalty, sanction, or regulatory follow‑up would arise from the powers of the external regulator(s) that have oversight of financial reporting compliance , those regulators are not named or described in the provided text.

The Board’s materials highlight practical enforcement realities and implementation burdens reported by respondents during consultation. Several respondents warned the cost of implementing the ED 302 proposals could exceed the benefits, particularly for for‑profit private sector entities that are legislatively required to comply with AAS and would have only a short transitional period (BC32). The Board responded by delaying effective dates in part to reduce the prospect of short‑term regulatory non‑compliance that might otherwise trigger enforcement action (BC34, BC38, BC51-BC53).

Because the AASB does not enforce, the material mechanisms that create exposure to regulatory action are:

• Public lodging of SPFS, which increases public and regulator visibility on whether an entity has made the required disclosures (BC36).
• Auditing and assurance processes: respondents flagged audit cost and complexity concerns (BC32), and audit scrutiny may identify failures to make required disclosures, triggering regulator interest.
• Other regulators’ compliance programs: while not described in the text, the Board anticipates enforcement lies with those bodies with jurisdiction over financial statement lodgement and compliance (BC50).

The Board’s approach also relies on disclosure as a transparency mechanism rather than an enforcement substitute for R&M compliance. The requirement to disclose non‑compliant material accounting policies and overall compliance status is intended to provide users and, by implication, regulators with the information necessary to assess the reliability of the financial statements (BC44). The Board’s deferral of the operative date for certain entities acknowledges the compliance cost and the potential for uneven enforcement if immediate application were required (BC51-BC53).

In summary, the Standard establishes disclosure duties rather than creating a new AASB enforcement or penalty regime. The Board explicitly leaves enforcement to other regulators and has adjusted operative dates to manage implementation and compliance risk. The source text does not provide details on specific penalties, sanctioning processes, or the identity of the enforcing bodies.

AASB 1054 sits within the web of accounting standards and interacts explicitly with other AASB standards and legal instruments. The standard was made under section 334 of the Corporations Act 2001, which is the statutory head of power for the AASB’s making of Accounting Standards (document header). The Basis for Conclusions situates this Standard relative to prior and related AASB work and specific standards:

• AASB 2020‑2: The Board’s decisions about scope and timing are heavily influenced by AASB 2020‑2, which removed the ability for certain entities to prepare SPFS for annual reporting periods beginning on or after 1 July 2021. The Board excluded entities that are required by legislation to comply with AAS (the entities that AASB 2020‑2 addresses) from the scope of the present Standard to avoid overlapping short‑term effects and to give those entities more time to transition to GPFS (BC32-BC39).

• AASB 2019‑4: The Board drew on its earlier approach in AASB 2019‑4 (which added disclosures for not‑for‑profit private sector SPFS) and applied similar reasoning to the present Standard, particularly the two‑step approach for R&M disclosure and the decision not to require omitted AAS disclosures (BC44, BC46, BC47).

• AASB 11 (Joint Arrangements), AASB 10 (Consolidated Financial Statements) and AASB 128 (Investments in Associates and Joint Ventures): The Board examined the treatment of joint arrangements and group interests. It concluded joint operations are R&M matters under AASB 11 and therefore cannot be excluded from R&M disclosure requirements (BC41-BC42). The Board also noted it excluded AASB 10 and AASB 128 from a particular aspect of the two‑step approach in the explanatory discussion, which signals careful interplay with consolidation and associate accounting rules (BC44).

• Constituting documents and other contracts: The Standard’s scope is defined by the existence and timing of constituting or other documents that require compliance with AAS. The cut‑off date of 1 July 2021 and the requirement that the document have not been amended on or after that date create an interaction between corporate governance instruments and accounting obligations (BC36). The Board acknowledged historical ambiguity about ambulatory references to AAS in constituting documents, which is a contractual interaction and part of the rationale for limiting the Standard to disclosure rather than mandating a shift to GPFS (BC49).

• AASB For‑Profit Entity Standard‑Setting Framework: The Board considered whether the Standard is consistent with its Framework. Some respondents argued the Standard contradicts the Framework because the AASB does not set R&M for SPFS. The Board concluded the Standard is consistent with the Framework because it imposes limited disclosure obligations without setting R&M requirements (BC47-BC48).

• Enforcement and other regulators: The AASB confirmed enforcement is the responsibility of other regulators, not the AASB (BC50). While the document does not name specific regulators, this establishes an interaction whereby the regulatory regime that oversees the lodgement and compliance of financial reports will be the mechanism for any follow‑up or sanction.

• Public lodging regimes: The Board pointed out the special concern that some entities outside the scope of AASB 2020‑2 might nevertheless lodge SPFS on the public record (for example securitised trading trusts) and therefore cause users to rely on financial statements that do not disclose whether R&M requirements of AAS have been applied (BC36). The Standard therefore interacts with statutory or regulatory lodgement regimes through its disclosure obligations.

In practical terms, these interactions mean entities must consider not only accounting technicalities but also the status of constituting documents, statutory requirements, and the potential for audit and regulator scrutiny. The Standard’s timing decisions and limited scope reflect these interactions, particularly where other AASB standards and legislative reforms overlap.

The compiled version of AASB 1054 is stated at the top of the provided text to incorporate relevant amendments made by the AASB up to and including 15 December 2022 and to apply to annual periods beginning on or after 1 January 2023. The Basis for Conclusions chronicles the development and amendment choices that led to the current form; the following items are explicit in the provided material:

• Original making: The Standard was made under section 334 of the Corporations Act 2001 on 11 May 2011 (document header). The Basis for Conclusions in this compilation relates to subsequent narrow‑scope amendments and their rationale.

• ED 302 and follow‑up: The Board issued Exposure Draft ED 302 proposing amendments. After consultation (13 formal comment letters), the Board proceeded with ED 302 proposals but made significant changes reflecting stakeholder feedback (BC30-BC33). The Board summarised retained proposals and focused subsequent discussion on the significant proposals it changed (BC30).

• Interaction with AASB 2020‑2 and AASB 2019‑4: The Board’s amendment decisions were taken in the context of recent standards, notably AASB 2020‑2 which altered the treatment of certain for‑profit private sector entities and AASB 2019‑4 which introduced disclosures for not‑for‑profit private sector entities (BC32-BC39, BC44-BC46). The Board explicitly referred to AASB 2020‑2 when excluding legislatively required entities from the scope and to AASB 2019‑4 when adopting the two‑step approach.

• Effective date changes and COVID‑19 timing adjustments: The Board initially decided on an effective date for annual reporting periods beginning on or after 1 July 2021, with earlier application permitted (BC51). It recognised stakeholder concerns about cost and the pandemic’s impact and deferred the effective date to periods ending on or after 30 June 2022 (which in substance covers periods beginning on or after 1 July 2021) and permitted earlier application (BC53). The Board then noted the compiled version applies to periods beginning on or after 1 January 2023 (compilation header). The Basis for Conclusions also sets out that the Board earlier considered an effective date covering years ending on or after 30 June 2020 for an interim narrow‑scope amendment (BC63), reflecting a shifting timetable as the project evolved.

• Limited scope amendments only: The Board framed the changes as narrow‑scope and interim, pending a broader project that might remove the ability for certain entities to prepare SPFS (BC61). The Board confirmed the amendment was urgently needed to provide transparency to users of publicly lodged SPFS of not‑for‑profit private sector entities and to increase comparability of SPFS with other financial statements, but the amendments were kept limited to disclosures rather than imposing new R&M requirements (BC61, BC62, BC49).

• Compilation: The document states it is a compiled version that incorporates AASB amendments up to 15 December 2022, but the Basis for Conclusions text reflects the policy debates and decisions leading up to and including timing and scope choices noted above.

The Amendment History in the provided text does not list an itemised table of every amendment or the full text of the operative amendments; instead, the Basis for Conclusions explains the policy choices and the contextual interaction with the AASB’s other standards and projects. If one needs precise amendment instruments and dates, the compilation header indicates the cut‑off date for included amendments, and the original making date is recorded at 11 May 2011 under s334 of the Corporations Act 2001.

The materials provided contain no cases, court decisions, or litigation matters regarding AASB 1054. The Basis for Conclusions discusses stakeholder feedback, cost and implementation concerns, and the Board’s policy choices, but it does not record any litigation that has interpreted or tested the Standard’s provisions.

Because the AASB explicitly places enforcement with other regulators (BC50), the potential for litigation in practice would arise only through the enforcement actions or disputes handled by those external regulators, or through disputes concerning the legal status of constituting documents and their references to AAS, none of which are discussed in the source text. The Board’s explanatory material does indicate areas that could give rise to contention in practice, such as:

• Disagreements over whether an entity’s accounting policies comply with the R&M requirements in AAS, particularly for complex standards like AASB 15 Revenue or AASB 119 Employee Benefits (BC51). Those assessment judgements, when subject to auditor or regulator scrutiny, can be the basis for disputes or enforcement action.
• Interpretive questions about whether a constituting document’s reference to AAS is ambulatory or static, and whether a constituting document was created before 1 July 2021 and amended or not thereafter (BC49, BC36). That temporal cut‑off could produce disputes over document drafting, amendment dates and the legal consequences of amendments.
• Audit and assurance disagreements over adequate disclosures in SPFS that are publicly lodged (BC36, BC32). Parties litigating over reliance on financial statements might raise the adequacy of disclosures, but the Basis for Conclusions records no such litigation.

The absence of litigation history in the provided text means the following: any expectation of litigation or regulatory disputes is speculative in the absence of concrete cases described in the source. The Board’s materials are focused on policy design, stakeholder feedback and operational implementation rather than recounting litigation experience.

The Basis for Conclusions highlights several implementation pitfalls, drafting traps and judgement calls that practitioners should note:

• Scope hinge on constituting/other documents and the 1 July 2021 cut‑off. The Standard applies only where the document requiring AAS compliance was created before 1 July 2021 and not amended on or after that date (BC36). Entities and advisers must check corporate constitutions, trust deeds and other documents for explicit AAS references and verify creation and amendment dates. Small changes or later‑dated amendments could flip an entity into or out of scope. The Board acknowledged many historical constituting documents contain ambulatory AAS references that entities may not have fully appreciated (BC49).

• Public lodgement increases scrutiny. The Board’s stated concern is about entities that lodge SPFS on the public record but that may not disclose the extent of R&M compliance (BC36). If an entity lodges its SPFS publicly, users will expect the disclosures the Standard requires; failure to provide them may attract regulatory attention even where no change to accounting policy is required.

• No ‘not assessed’ safe harbour. The Board rejected a ‘not assessed’ option (BC45). Entities must assess material accounting policies for compliance with R&M requirements. For smaller entities, this may require asking auditors or specialists to assist with application of standards such as AASB 15 and AASB 119 (BC51). The inability to say “we haven’t assessed this” removes a potential defensive posture and puts the onus on entities to document their assessment.

• Joint operations are R&M issues. Some respondents argued joint operations should be excluded by analogy with subsidiaries and associates. The Board rejected that exclusion, pointing to AASB 11 which requires recognition of assets and liabilities in joint operations , hence joint operations are R&M matters and must be considered in the material policy disclosure (BC41-BC42). Entities with joint operations must therefore ensure policy descriptions and R&M assessments cover these arrangements.

• No requirement to disclose omitted AAS disclosures. The Board considered expanding the Standard to require an entity to identify where it elected to omit material GPFS disclosures under other AAS (eg related party disclosures) but decided that was beyond scope (BC46). Practitioners must be careful: the Standard does not force disclosure of every omitted item, but other regulatory regimes or users might still expect some of those disclosures.

• Two‑step approach does not eliminate work. The two‑step approach is intended to reduce burden by focusing on material accounting policies first (BC44). However, entities must still perform an initial materiality assessment and confirm compliance for material policies. In practice, that assessment may be non‑trivial and could require specialist input.

• Timing and effective date complexity. The Board shifted operative dates multiple times (BC51-BC53, BC63). The compiled version states application for annual periods beginning on or after 1 January 2023, yet the Basis for Conclusions also records earlier proposed effective dates and deferrals. Practitioners must rely on the operative text and check whether their reporting periods fall within the operative window, and whether earlier application is advantageous (BC51, BC53, BC63).

• AASB does not enforce. Although the Standard imposes disclosure duties, enforcement is the responsibility of other regulators (BC50). That means the remedy for non‑compliance is administered outside the AASB’s governance, and entities should anticipate regulator verification or audit scrutiny rather than direct AASB sanctions.

• Discrepancy between no change to accounting policies and assessment requirement. The Board emphasises the Standard “does not require entities to change their existing accounting policies or perform additional assessment of compliance” (BC62). That wording must be read carefully: the Board says the information required will be based on existing policies and practices, but the two‑step disclosure approach and the rejection of a ‘not assessed’ option mean entities must evaluate whether those policies comply with R&M requirements and disclose material non‑compliances (BC44-BC45, BC62). In short, while the Standard does not require re‑measurement, it does require judgement and documentation.

• Interaction with other AAS: in complex areas such as revenue recognition and employee benefits, determining compliance with R&M requirements may be difficult for small entities and could increase audit cost and effort (BC51). This is a specific implementation risk flagged by the Board and respondents.

These practical “gotchas” collectively point to areas where entities will need care: documentary review of governing instruments, materiality judgements, joint arrangement accounting, and evidence to support the required disclosures, particularly where financial statements are publicly lodged.

Compliance with AASB 1054 as compiled and explained in the Basis for Conclusions requires a series of concrete steps. The Board emphasises the disclosures are based on existing accounting policies and practices (BC62), but the entity must document assessments. The following is a practical, source‑grounded checklist and workflow:

1. Confirm applicability

   • Check whether the entity is a for‑profit private sector entity required only by a constituting document or another document to prepare financial statements that comply with AAS, and verify that the constituting or other document was created before 1 July 2021 and not amended on or after that date (BC36).
   • If the entity is required by legislation to comply with AAS, it is excluded from the scope of this Standard (BC34, BC38-BC39).
   • Confirm whether the entity voluntarily prepares SPFS or has references to ‘GAAP’ or ‘true and fair’ without explicit AAS reference. Those cases are outside scope (BC37).

2. Prepare reporting‑framework disclosure

   • Prepare the disclosure required by paragraphs 8 and 9 of AASB 1054, describing the reporting framework and whether the financial statements are GPFS or SPFS. The Board considered this minimal cost and necessary context for users (BC40).
   • As part of this, prepare the disclosure required by paragraph 9C(a) on the basis for the decision to prepare SPFS (BC40).

3. Conduct the two‑step R&M assessment

   • Step one: Identify material accounting policies. For each material accounting policy, assess whether it complies with the R&M requirements in AAS. Where a material policy does not comply, prepare the disclosure required by paragraph 9C(e) (BC44).
   • Step two: After step one, determine whether, overall, the financial statements comply with all R&M requirements. If all material policies comply, the entity can make the overall compliance statement under paragraph 9C(f). If there are material non‑compliances disclosed in step one, the entity must disclose that the financial statements do not comply overall or state the extent of non‑compliance as required (BC44).
   • Do not elect a ‘not assessed’ position. The Board rejected that option and expects assessments to be made (BC45).

4. Address joint arrangements and group interests

   • For joint operations, ensure the assessment covers recognition of the entity’s share of assets, liabilities, revenue and expenses in line with AASB 11, as those are R&M matters and must be included in the disclosure work (BC41-BC42).
   • Where the entity has subsidiaries, associates or joint ventures, prepare the disclosures relevant to those interests if material, but note the Board chose not to require an explicit statement that the entity has none (BC43).

5. Document the basis of conclusions

   • Record the factual basis, including references to relevant constituting documents, the analysis of individual accounting policies against R&M requirements, the materiality judgements, and the overall compliance conclusion. The Board flagged that the disclosures should be based on existing policies and practices (BC62).

6. Consider audit and assurance implications

   • Engage with auditors early, particularly on complex standards such as AASB 15 and AASB 119, where the Board recognised smaller entities may face difficulties in determining compliance (BC51). Auditors will likely review the disclosures and the supporting assessment work.

7. Consider timing and early adoption

   • The Board permitted earlier voluntary disclosure and early application (BC63, BC51). Check the operative date that applies to your reporting period in the compiled Standard (header states annual periods beginning on or after 1 January 2023) and consider early adoption where beneficial.

8. Internal control and governance

   • Ensure board minutes or governance documents record the basis for the decision to prepare SPFS (as required by paragraph 9C(a) and referenced in BC40) and the approval of the R&M compliance disclosures.
   • Where constituting documents are ambiguous, consider legal advice to clarify whether a reference to AAS is ambulatory and when amendment dates were effective (BC49).

9. Disclosure drafting

   • Draft the reporting framework and R&M disclosures in plain language, but ensure they map to the required paragraphs (eg paragraphs 8 and 9, paragraph 9C(e), paragraph 9C(f); the Board refers to these disclosures throughout BC40-BC46). Do not invent broader statements that go beyond the two‑step R&M disclosure approach the Board adopted.

10. Lodgement considerations

    • If the entity lodges SPFS on the public record, anticipate greater user and regulator scrutiny and ensure the disclosures are complete and supported, as public lodging was one of the Board’s central concerns (BC36).

Risks and resource considerations noted by the Board:

• Cost and complexity for smaller entities: stakeholders warned implementation costs could exceed benefits, particularly for entities facing only a short transitional period and for those needing specialist input on complex standards (BC32, BC51).
• Evidence and audit evidence: the Board expects the disclosure information to be based on an entity’s existing policies and practices (BC62), but auditors and regulators may require documentary evidence of the assessments performed.
• No enforcement by AASB: because enforcement lies with other regulators (BC50), entities should be prepared to respond to inquiries from those bodies.

In practice, legal, accounting and governance teams should coordinate to confirm scope, document constituting‑document status, perform the two‑step materiality and compliance assessment, prepare the required disclosures (including the reporting framework statement), engage auditors early on complex matters, and retain documentation to support the public lodgement of SPFS where applicable.