AASB 1060 Worked Examples: Tier 1 vs. Tier 2 Disclosure Compared
The same set of transactions disclosed under full Tier 1 recognition and measurement, then under Tier 2 Simplified Disclosures, side by side.
- Part 1: Fundamentals
- Part 2: Worked Examples: Tier 1 vs Tier 2
- Part 3: Transition from Special Purpose Reports
- Part 4: Common Disclosure Omissions
The Same Balances, Two Different Note Sets
Part 1 established that Tier 1 and Tier 2 share identical recognition and measurement, differing only in disclosure. This guide makes that concrete by taking one mid-sized proprietary company’s actual balances and showing exactly how the notes differ between full Tier 1 disclosure and AASB 1060 Simplified Disclosures.
Example 1: Borrowings and Interest Rate Risk
Facts: the company holds a $4,000,000 variable-rate bank loan, maturing over five years, with quarterly principal repayments.
| Tier 1 disclosure | Tier 2 (AASB 1060) disclosure | |
|---|---|---|
| Maturity analysis | Detailed contractual maturity table across multiple time bands | A simple current/non-current split |
| Interest rate sensitivity | A quantified sensitivity analysis showing profit impact of a defined basis-point movement | Not required — a narrative description of the exposure is sufficient |
| Fair value of borrowings | Fair value disclosed and compared to carrying amount | Not required where carrying amount approximates fair value |
The Tier 2 note for this borrowing might run to two or three sentences and a current/non-current split; the equivalent Tier 1 note, with full sensitivity tables and maturity bands, can easily run to half a page.
Example 2: Property, Plant and Equipment
Facts: the company holds land and buildings, plant and equipment, and motor vehicles, all measured at cost less accumulated depreciation.
Both tiers require a reconciliation of the opening and closing carrying amount for each class of asset — additions, disposals, depreciation, and impairment all still need to be shown. AASB 1060 does not remove this core reconciliation because it is considered essential to understanding how the asset balance moved, regardless of entity size.
Detailed useful life ranges broken out with granular sensitivity commentary, and extensive narrative about the judgments involved in estimating useful lives, are reduced to a brief statement of the depreciation method and useful life range applied for each asset class.
Example 3: Related Party Transactions
Facts: the company’s sole director also owns the commercial property the company leases as its head office, at a rent the director asserts is at market rate.
Related party disclosure requirements are one area where Tier 2 does not meaningfully reduce the substance of what must be disclosed — AASB 1060 retains the core requirement to disclose the nature of the relationship, the transaction, and its terms, because related party transactions are considered high-risk regardless of entity size or tier. This is a useful reminder that “Simplified Disclosures” does not mean uniformly lighter-touch across every topic; some areas (related parties, going concern, key judgments) are deliberately preserved at close to full strength because they matter regardless of an entity’s public accountability status.
What This Means in Practice
The pattern across these examples is consistent: Tier 2 strips out the quantitative depth aimed at sophisticated capital-markets users — sensitivity tables, detailed maturity bands, segment breakdowns — while retaining the qualitative substance that any reader needs to understand what the entity owns, owes, and is exposed to. A preparer moving from special purpose statements to AASB 1060 should expect the note disclosures to be noticeably shorter than a listed company’s, but should not expect them to be trivial — related parties, contingencies, and key accounting judgments still require real disclosure work.
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