AASB Australian Accounting Standards: IFRS Equivalents and Tier 2 Reduced Disclosure

AASB and IFRS alignment

The Australian Accounting Standards Board (AASB) develops accounting standards under the authority of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001. Australia adopted International Financial Reporting Standards (IFRS) as the foundation for general purpose financial reporting from 1 January 2005.

AASB standards are structured to reflect their IFRS counterparts. This means that the numbering of AASB standards corresponds to the equivalent IFRS standard, for example, AASB 16 aligns with IFRS 16 Leases, and AASB 9 with IFRS 9 Financial Instruments. AASB 15 is equivalent to IFRS 15 Revenue from Contracts with Customers.

Where necessary for application within the not-for-profit or public sector, AASB standards incorporate minor amendments specific to Australian requirements. The AASB also releases AASB Interpretations, which are aligned with IFRIC Interpretations.

Tier 1 vs Tier 2 reporting

AASB 1053 'Application of Tiers of Australian Accounting Standards' establishes a two-tier reporting framework for Australian entities. This framework distinguishes between Tier 1 (General Purpose Financial Statements) and Tier 2 reporting.

Tier 1 reporting requires the application of the full suite of AASB standards, which are equivalent to International Financial Reporting Standards (IFRS). Entities that must apply Tier 1 include for-profit publicly accountable entities, such as ASX-listed companies, banks, insurance companies, and superannuation funds with members.

Tier 2 reporting allows entities to apply the Simplified Disclosure Framework. This framework, detailed in AASB 1060 (effective for reporting periods beginning on or after 1 July 2021), provides reduced disclosure requirements while maintaining the same recognition and measurement requirements as Tier 1.

Special purpose vs general purpose

The historical Special Purpose Financial Statements (SPFS) framework has been progressively narrowed. For-profit private sector entities required by legislation or constituting documents to prepare financial statements complying with Australian Accounting Standards can no longer prepare SPFS for annual periods beginning on or after 1 July 2021.

These entities must now prepare General Purpose Financial Statements, choosing between Tier 1 or Tier 2 disclosure options. This change reflects a move towards greater consistency and comparability in financial reporting.

Not-for-profit entities and other entities without a specific compliance requirement may still prepare SPFS. The AASB continues to consult on extending the requirement for general purpose financial statements, and is also consulting on a single Tier 3 for smaller not-for-profit entities.

Key recent AASB standards

The AASB has recently issued several standards impacting financial reporting in Australia. AASB S2 Climate-related Financial Disclosures was issued in September 2024 to support the mandatory sustainability reporting regime. This standard applies from 1 January 2025 for Group 1 entities, with a phased introduction for Group 2 and Group 3 entities.

AASB 1060 'General Purpose Financial Statements - Simplified Disclosures' for For-Profit and Not-for-Profit Tier 2 Entities applies to annual periods beginning on or after 1 July 2021. This standard provides reduced disclosure requirements for Tier 2 entities.

Other key recent standards include AASB 18 'Presentation and Disclosure in Financial Statements', which applies from 1 January 2027, and AASB 17 'Insurance Contracts', which replaced AASB 4 and applies from 1 January 2023.