AASB 1060 Simplified Disclosures: The Two-Tier Reporting Framework
Who qualifies for Tier 2 reporting, what Simplified Disclosures actually removes, and why so many entities were forced into general purpose reporting after 2021.
Why This Standard Reshaped Australian Reporting
For decades, a large share of Australian for-profit private companies — and many NFPs — prepared “special purpose financial statements,” selectively applying only the accounting standards their directors judged relevant, and skipping consolidation, full disclosure, or even some recognition and measurement requirements entirely. The AASB progressively closed this loophole, and since 2021, most for-profit private sector entities that were previously eligible for special purpose reporting have been required to prepare general purpose financial statements instead. AASB 1060 General Purpose Financial Statements — Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities is the standard that made that shift survivable — it is a stripped-down disclosure regime built specifically for entities that must now report at general purpose level but do not have the scale, systems, or user base to justify full Tier 1 disclosure.
Two Tiers, Not Two Sets of Recognition Rules
It is critical to understand precisely what AASB 1060 changes and what it does not. The two-tier framework affects disclosure only — recognition and measurement (when and how much to record) are identical under Tier 1 and Tier 2. A Tier 2 entity still applies every applicable AASB recognition and measurement requirement — fair value measurement under AASB 13, lease accounting under AASB 16, revenue recognition under AASB 15 — in exactly the same way a Tier 1 entity does. What changes is how much the entity has to disclose about those balances in the notes.
Tier 2 is not a simplified accounting framework, and it is not the same as the old special purpose regime. An entity cannot use Tier 2 status to skip consolidating a subsidiary, avoid measuring inventory at the lower of cost and net realisable value, or leave a finance lease off balance sheet. Every recognition and measurement standard still applies in full — only the notes get shorter.
Who Can Use Tier 2
Tier 2 (Simplified Disclosures) is available to any entity that is required to prepare general purpose financial statements but does not have “public accountability” as defined by the standards — broadly, entities that are not listed, are not in the process of listing, and do not hold assets in a fiduciary capacity for a broad group of outsiders as a primary business (banks, insurers, and similar deposit-taking or fiduciary institutions are typically excluded from Tier 2 eligibility on public accountability grounds). Most proprietary companies, many NFPs, and many entities reporting under the Corporations Act or an NFP’s own constituting legislation qualify for Tier 2.
What Gets Removed Under Simplified Disclosures
AASB 1060 works by taking each applicable standard’s disclosure requirements and paring them back to a genuinely reduced set, focused on what a Tier 2 user actually needs rather than everything a listed-company investor might want. The disclosures most commonly and substantially reduced include:
| Area | Tier 1 requires | Tier 2 (AASB 1060) requires |
|---|---|---|
| Financial instruments | Extensive risk disclosures — sensitivity analyses, detailed maturity profiles, hedge accounting disclosures | A much shorter risk summary, without granular sensitivity tables |
| Segment reporting | Full operating segment disclosures under AASB 8 | Not required at all for Tier 2 entities |
| Fair value | Detailed Level 3 reconciliations and sensitivity disclosures | A reduced fair value hierarchy disclosure, without full Level 3 sensitivity analysis |
| Earnings per share | Required for entities within scope of AASB 133 | Not required |
Structure of the Standard
AASB 1060 is organised to mirror the structure of the underlying recognition and measurement standards — it does not stand alone as a single list, but works through each topic (revenue, leases, financial instruments, related parties, and so on) and specifies exactly which of that topic’s Tier 1 disclosures are retained, reduced, or removed for Tier 2. This means a Tier 2 preparer still needs to know the full suite of AASB standards that apply to its transactions; AASB 1060 only tells it how much to say about them in the notes, not which standards apply in the first place.
Practical Takeaway
For an entity newly required into general purpose reporting, AASB 1060 is usually good news — it means a far shorter, more manageable set of financial statements than full Tier 1 disclosure would demand, while still meeting a genuine general purpose reporting obligation. The work in practice is less about drafting new disclosures from scratch and more about correctly identifying which Tier 1 disclosures to drop, which is where a checklist built directly against AASB 1060’s own disclosure requirements (rather than working backward from a generic template) earns its keep.
Have a Question in the Meantime?
Been pushed out of special purpose reporting and need help with Tier 2 disclosures? Talk to us.