Businesses and companies in Australia must meet various reporting requirements to comply with a range of regulations and necessities. The preparation and presentation of financial accounts are guided by the Australian Accounting Standards, which are developed by the Australian Accounting Standards Board (AASB). These standards have been updated to align with global practices, ensuring that the current AASBs are equivalent to the International Financial Reporting Standards (IFRS).
Generally, businesses produce two types of financial Statements:
Special Purpose Financial Statements
Special-purpose financial statements are designed for a limited group of users or specific purposes. Examples include financial statements prepared for tax reporting, bank reporting, and industry-specific reporting. Most small to medium enterprises (SMEs) and not-for-profit entities will create a profit and loss statement and a statement of financial position tailored to the specific needs or requirements established by their directors, owners, or members.
General Purpose Financial Statements
General-purpose financial statements provide financial information about the reporting entity that is useful to existing and potential investors, lenders, and other creditors for decision-making purposes. These statements are issued throughout the year and include:
- A statement of financial position
- A statement of profit or loss and other comprehensive income
- A statement of changes in equity
- A Cash flow statement
- Notes, including key accounting policies and additional explanatory information; and comparative data relating to a specific period
Your business, organisation, or charity can opt to prepare either full General Purpose Financial Statements (Tier 1) or General Purpose Financial Statements using a simplified disclosure framework (Tier 2).
These statements adhere to the Australian Accounting Standards and generally follow a specified format, though some flexibility remains. Entities required to prepare these statements are determined under the Corporations Act 2001 and the application of the Statement of Accounting Concepts.
Entities Required to Prepare General Purpose Financial Statements
The following entities listed below are required to prepare General Purpose Financial Statements:
- Large proprietary companies
- Unlisted public companies
- Foreign-controlled small proprietary companies
- Financial services licensees
- Small proprietary entities where over 5% of members request the preparation of financial statements
From 1 July 2022, for-profit entities that must comply with Australian Accounting Standards based on their constituting documents are also required to prepare General Purpose Financial Statements. Constituting documents include any legal agreements stipulating adherence to these standards, such as:
- Superannuation fund trust deeds
- Other trust deeds
- Partnership agreements
- Business acquisition contracts
- Joint venture agreements
- Legal settlements
- Lending agreements
These entities will not be allowed to prepare and lodge Special-purpose financial statements for years ending on 30 June 2022 and onwards.
Small companies that are not legally required to prepare or submit financial statements to ASIC do not need to lodge General Purpose Financial Statements.
Seek Expert Advice
The team of tax accountants at The Quinn Group can help in navigating your reporting requirements and preparing financial statements. Contact the team on 1300 QUINNS (1300 784 667) or +61 2 9223 9166, or submit an online enquiry to arrange an appointment.
