How to Choose the Right Financial Statements in Australia: GPFS, SPFS and the New Tier Framework Explained 

Understanding financial statements: SPFS vs GPFS 

When we hear the term “financial statements,” it can mean many different things – Special Purpose, General Purpose, Tier 1, Tier 2 and at some point in the future, maybe Tier 3. This article explores these classifications and how preparers and auditors can ensure their financial statements comply with legislation, Australian accounting standards, and regulatory requirements. 

A brief history of the reporting entity concept in Australia 

For many years, Australia relied on the reporting entity concept to determine the type of financial statements entities should prepare. However, this judgement-based approach led to inconsistencies, as similar entities could prepare financial statements under different frameworks, reducing comparability. 

AASB 2020-2: Ending SPFS for For-Profit Entities 

To address these issues, the Australian Accounting Standards Board (AASB) initiated a project in 2018 to eliminate the reporting entity concept. AASB 2020-2 formally removed the ability of many for-profit entities to prepare SPFS. This amendment applies to annual reporting periods beginning on or after 1 July 2021. 

The diagram below illustrates the methodology in place for for-profit entities for annual reporting periods commencing on or after 1 July 2021: 

When are Australian entities required to prepare GPFS? 

Under the new methodology, all for-profit entities lodging financial reports with the Australian Securities and Investments Commission (ASIC) under the Corporations Act 2001 must now prepare GPFS. Entities should also review their constitutions, trust deeds, sale/purchase agreements and bank agreements to determine reporting obligations. 

How the grandfathering clause affects financial reporting 

Entities are not required to revise existing documents that pre-date the accounting standard. However, if these documents are amended after 1 July 2021 and if they still require compliance with Australian Accounting Standards, the exemption is lost and the entity must prepare GPFS. 

Reviewing legal documents that trigger GPFS obligations 

Documents such as constitutions, trust deeds, sale and purchase agreements, and financing agreements should be closely reviewed. Any reference to Australian Accounting Standards in an amended document can activate the requirement for GPFS preparation. 

What tier of GPFS should you prepare? Tier 1 vs Tier 2 explained 

Once the need to prepare GPFS is established, the next step is identifying the appropriate tier: 

• Tier 1 GPFS: Complies with all recognition, measurement, presentation and disclosure requirements of Australian Accounting Standards and aligns with IFRS. This is required for publicly accountable entities. 

• Tier 2 GPFS (Simplified Disclosures): Suitable for entities that are not publicly accountable. These statements present the same financial position as Tier 1 but with reduced disclosures, making them more cost-effective to prepare and audit. 

What to expect from Tier 3 GPFS for Not-for-Profit Entities 

At present, not-for-profit (NFP) private-sector entities still use the reporting entity concept. However, this is expected to change. The AASB has released two exposure drafts (ED 334 and ED 335) that propose: 

• Restricting SPFS for NFPs 

• Introducing Tier 3 GPFS with simplified recognition and measurement rules 

These drafts closed for comment on 28 February 2025, with final standards expected in the first half of 2026. Tier 3 will be a standalone standard with less alignment to Tier 1 and Tier 2, and entities will report different figures depending on their selected accounting policies. 

Next steps: How auditors and preparers should respond 

To stay compliant, entities and their advisors should: 

• Reassess whether GPFS are required under current documents 

• Determine the appropriate GPFS tier 

• Monitor the AASB’s Tier 3 rollout for NFPs 

• Avoid amending legacy documents unless necessary 

Tools and templates for Tier 1 and Tier 2 GPFS 

Caseware’s financial reporting solution offer templates designed to support Tier 1 and Tier 2 GPFS reporting. These tools help ensure accurate, consistent and compliant financial statements across both the for-profit and not-for-profit sectors. 

Take action now to stay ahead of financial reporting reforms 

The shift to a structured financial reporting regime is already well underway. Now is the time for entities to take stock of their obligations, revisit existing documentation and plan their transition to the appropriate GPFS tier. With Tier 3 on the horizon for NFPs and increasing scrutiny on disclosure quality, early preparation is critical. Equip your teams, review your frameworks and stay ahead of compliance—before it becomes urgent. 

Equip yourself for compliance and confidence 

Navigating financial reporting reforms doesn’t have to be a burden. By investing in fit-for-purpose tools and resources that streamline compliance, entities can focus on strategic decision-making with confidence in their reporting. Whether you’re a not-for-profit preparing for Tier 3 or a for-profit moving from SPFS to GPFS, adopting smart technology solutions will help you ensure accuracy, transparency and peace of mind in your financial reporting processes. Solutions like Caseware can help finance teams build more efficient workflows, reduce reporting errors and adapt confidently to evolving standards—supporting better outcomes across the financial reporting lifecycle. 

FAQs 

Do I need to move from SPFS to GPFS? 

If your entity lodges reports with ASIC or is governed by documents referencing Australian Accounting Standards and those documents have been amended after 1 July 2021, you are likely required to prepare GPFS. 

What is the difference between Tier 1 and Tier 2 GPFS? 

Tier 1 requires full disclosures under IFRS, typically for publicly accountable entities. Tier 2 uses the same measurement principles but offers reduced disclosures, making it more cost-effective for smaller or private entities. 

Who will qualify for Tier 3 GPFS? 

Tier 3 is intended for certain not-for-profit entities. Eligibility will be determined by the regulator (e.g. ACNC) once the AASB finalises the standard in 2026.