Removal of Special Purpose Financial Statements (“SPFS”) | Queensland Building and Construction Commission

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The key change introduced by AASB 2020-2 is that entities within its scope are no longer able to use SAC 1 to determine whether they can prepare SPFS. Previously an entity could use SAC 1 to determine if it was a reporting entity or not, based on an assessment of whether there are users of its financial statements that were “dependent on general purpose financial statements for information for making and evaluating resource allocation decisions”. If the entity was not a “reporting entity” then SAC 1 permitted the preparation of SPFS rather than General Purpose Financial Statements (“GPFS”).

The alteration to the scope of SAC 1 means that for affected entities, the minimum reporting requirements are now GPFS. However, they are not required to transition to Tier 1 GPFS, which involves the application of all the recognition, measurement, presentation, and disclosure requirements of Australian Accounting Standards (“AAS”).

The entities that are within the scope of AASB’s reporting framework reforms (required to prepare GPFS) are detailed in new paragraph 2A of SAC 1. Those entities are:

  • For-profit private sector entities that are required by legislation to prepare financial statements that comply with either Australian Accounting Standards or accounting standards;
  • Other for-profit private sector entities that are required only by their constituting document or another document to prepare financial statements that comply with Australian Accounting Standards, provided that the relevant document was created or amended on or after 1 July 2021; and
  • Other for-profit entities (private sector or public sector) that elect to prepare general purpose financial statements.

Based on paragraph 2A(a) of SAC 1, if for-profit entities have a legislative requirement to prepare financial statements and the legislation states that these financial statements must be prepared in accordance with “Australian Accounting Standards” or “accounting standards”, then they are within the scope of the reforms (required to prepare GPFS).

As the QBCC specifically requires financial information to be prepared in accordance with the prescribed accounting standards, and because prescribed accounting standards means “Australian Accounting Standards”, then licensee must provide QBCC with General Purpose Financial Statements. 

Non-Statutory Documents

The reporting requirements for some entities are not driven by legislation but by non-statutory documents. A non-statutory document in this context refers to any constituting document such as a trust deed, partnership agreement or joint venture agreement. Examples of entities that fall within this category can include trusts, sole traders, partnerships and joint arrangements. 

If non-statutory documents, such as those discussed above, make specific reference to the preparation of financial statements in compliance with “Australian Accounting Standards” then such entities could fall within the scope of the reforms and will need to prepare GPFS. However, it is important to note this will be the case only if the non-statutory document is created or amended after 1 July 2021 and includes, or retains, a requirement to comply with “Australian Accounting Standards”.

Therefore whilst the non-statutory agreements may specifically not require financial statements to be prepared in accordance with the Australian Accounting Standards, as a licence holder, the QBCC requires financial statements to be prepared in accordance with the Accounting Standards, and therefore those entities operating in a Trust, Partnership, Joint Venture or Sole Trader must still provide GPFS.

Impact on QBCC

Section 4B(2) and (3) in the MFR Regulation states, “Also, if a document mentioned in subsection (1) is amended or replaced, a prescribed accounting standard includes the document as in force immediately before it was amended or replaced. However, subsection (2) applies in relation to a document only for a period of 12 months starting on the day the amendment or replacement takes effect”

The QBCC applied the 12 month transition to AASB 2020-2 and AASB 1060. The 12 months expires on 30 June 2022, and therefore financial years beginning on or after 1 July 2022, the QBCC must now enforce AASB 2020-2 and AASB 1060. 

Therefore, we can accept Special Purpose Financial Statements for licensee’s with a period end date of 30 June 2022 or before, however for period end dates that are for 1 July 2022 or later, they must provide GPFS. This will apply to all licensees because of the requirements set out within the MFR Regulation. 

Please note that these legislative changes are as a result of amendments to AAS, not the QBCC. 

Information has been sourced from CPA Australia. 

All requirements pertaining to the Minimum Financial Requirements are set out within the Queensland Building and Construction Commission (Minimum Financial Requirements) Regulation 2018 (“MFR Regulation”)

Minimum Financial Requirements

Section 8(2) in the MFR Regulation states, “the information or documents must comply with the prescribed accounting standards” Where in the MFR Regulation, or in any other form of legislation, if the word ‘must’ is used, this means that no discretion can be applied.

Prescribed accounting standards is defined under section 4B in the MFR Regulation as:

“A prescribed accounting standards means any of the following documents published by the Australian Accounting Standards Board – 

  • Australian Accounting Standards;
  • Statements of Accounting Concepts;
  • Interpretations;
  • Framework for the Preparation and Presentation of Financial Statements.

It is a requirement within the MFR Regulation for signed financial statements to be prepared in accordance with the prescribed accounting standards (as defined in Schedule 3) “Signed financial statements, for a licensee, means all of the following— 

  • Financial statements prepared under the prescribed accounting standards, including— 
    • a profit and loss statement; and 
    • a balance sheet; and 
    • aged debtors and creditors report that includes the date each invoice is due to be paid or received; and 
    • a statement of cashflows; 
  • Notes to the financial statements mentioned in paragraph (a) required under the prescribed accounting standards; 
  • A declaration signed by the licensee, or an executive officer of the licensee, verifying the information contained in the documents mentioned in paragraphs (a) and (b); 
  • A description of— 
    • the measurement, within the meaning of the prescribed accounting standards, on which the financial statements mentioned in paragraph (a) are based; and 
    • the accounting policies or reports relevant to the financial statements;”

Last reviewed: 18 Jul 2022 Last published: 18 Jul 2022
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