Key actions - Getting ready for Simplified Disclosures at June 2022
Why does it matter? There is a significant change in reporting for June 2022 with the removal of special purpose financial statements for most private sector for-profit entities and first-time adoption of the new Tier 2 ‘Simplified Disclosures’ Standard (AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities). The transition process can be more complex and time consuming than expected.
With mere months until 30 June 2022, entities impacted by the removal of special purpose financial statements need to ensure they can implement the new Simplified Disclosures requirements and meet reporting deadlines.
Tools and resources
We have the following tools and resources available to assist entities implement the new requirements:
Special edition ‘Client financial reporting update’ "NEW"
Tier 2 Simplified Disclosures model financial report "NEW"
Our Tier 2 model financial report illustrates the disclosures required under AASB 1060, including the transitional disclosures required when moving from unconsolidated special purpose financial statements to consolidated financial statements (an edition dealing with early adoption is also available).
Clarity publications "UPDATED"
The following publications have been updated to reflect amendments and developments since their original issue:
Clarity publicationRemoval of special purpose financial statements. This publication explains which entities are affected by the removal of special purpose financial statements and provides an overview of the transition process
Clarity publication Simplified Disclosures – Transition options and opportunities. This publication explains the process of transition in more detail, explains when each transition option applies and explores the practical issues arising on transition.
Financial reporting implications of current events
Why does it matter? Entities need to ensure they correctly reflect the accounting implications arising from a series of events on a global and national scale over recent months.
The advent of the Russia-Ukraine war and floods and extreme rain events in Eastern Australia have come as the global community moves toward ‘living with’ the COVID-19 pandemic.
In responding to the COVID-19 pandemic, entities are familiar with volatility, uncertainty and risk management aspects of these types of events which result in similar financial reporting themes and issues for consideration.
A number of recent publications can assist entities with understanding their financial reporting responses to these types of events:
IFRS in Focus Closing out 2021 - This special edition of IFRS in Focus sets out financial reporting issues that may be relevant for years ending on or after 31 December 2021 as a result of areas of regulatory focus, the current economic environment or changes in accounting standards
Key developments - ISSB issues sustainability reporting exposure drafts with a view to final standards this year
Why does it matter? Entities need to respond to a continuing global push for standardised environmental, social and governance (ESG) reporting and be aware of recent Australian developments exploring how global developments might be implemented in the Australian context.
The Chair and Vice-Chair of the International Sustainability Standards Board (ISSB) have published two exposure drafts:
Exposure Draft IFRS S1General Requirements for Disclosure of Sustainability-related Financial Information - this exposure draft proposes requiring the disclosure of information about significant sustainability-related risks and opportunities (including, but not limited to, climate change). The exposure draft includes proposals for definitions and requirements that are consistent with the IASB® Conceptual Framework for Financial Reporting, IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors pronouncements for financial reporting. Sustainability-related financial disclosures would be required to be published at the same time as the financial statements (IASB project page, IAS Plus summary)
Given the urgency in global calls for sustainability reporting standards, the ISSB has published these exposure drafts before a full contingent of the ISSB board is in place. Over recent weeks, agreement was sought from the IFRS Foundation Due Process Oversight Committee (DPOC) to proceed with issue of exposure drafts with a view to finalising standards from the proposals by the end of calendar 2022.
Jurisdictional authorities would decide whether to require the application of IFRS Sustainability Disclosure Standards, just as they have decided whether to require the application of IFRS Accounting Standards. The ISSB does not have the right to mandate the application of its Standards. However, companies can choose to apply them.
Comments on the ISSB proposals close on 29 July 2022.
The AASB has also issued an equivalent Exposure Draft, ED 321 Request for Comment on ISSB [Draft] IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and [Draft] IFRS S2 Climate-related Disclosures, seeking feedback in the Australian context. ED 321 outlines the AASB’s preliminary decision to position Australian sustainability-related reporting requirements as a separate suite of standards, which leaves the decision to mandate sustainability-related financial reporting with the relevant Australian legislators. Comments on the AASB’s proposals close on 15 July 2022.
For more information, see the ISSB press release and iGAAP in Focus Sustainability reporting — ISSB proposes global baseline of sustainability disclosure standards for capital markets.
Accounting implications of the Federal Budget
Why does it matter? The Federal Government’s 2022-23 budget was handed down on Tuesday 29 March 2022 and has financial reporting implications.
As in previous years, the 2022-23 Federal Budget can have a broad range of financial reporting implications, including:
Impairment and other models
Model forecasts and assumptions should be reviewed for consistency with the overall budget assumptions and forecasts and differences explained
New and extended wage subsidy schemes for apprenticeships will impact forecast cash flows and planning for eligible entities
Changes to petroleum excise will impact forecasts for many entities, including those eligible for a rebate
Changes to payment arrangements for government imposts should be taken into account in forecasts where significant impacts on cash outflows are expected.
The expansion of the proposed ‘patent box’ regime to emission reduction technologies and agriculture from 1 July 2023 will impact current and deferred tax of eligible entities once substantively enacted
The immediate tax deduction for capital expenditure and tax loss carry-backs measures have not been extended and will impact deferred taxes in future periods.
Entities eligible for the apprenticeship subsidies will need to consider the recognition and measurement of the government grants
The immediately implemented change to petroleum excise may impact inventory costing or rebate accruals
Whilst arising from previous budgets, the temporary levy on offshore petroleum production to recover the Commonwealth’s costs of decommissioning the Laminaria and Corallina oil fields and associated infrastructure from 1 July 2021 was passed by Parliament on 30 March 2022 and its final provisions should also be taken into account in accounting.
Why does it matter? Being aware of recent developments allows you respond to those affecting your clients in a timely and informed manner.
A summary of recent developments:
ASX Listing Rules proposals
The ASX has issued a Consultation Paper Proposed enhancements to the ASX Listing Rules: Continually improving the reputation and integrity of the ASX market, which proposes various amendments to the ASX Listing Rules across a broad range of topics, including:
The issuance of securities by listed entities - including in relation to share purchase plans, pro-rata issues and material placements (some of these proposals are largely consistent with measures the ASX put in place in response to the COVID-19 pandemic)
The financial reporting framework for listed entities - introducing new accounting requirements for quarterly cash flow reports, requiring Tier 1 financial reports (unless the ASX agrees otherwise), and dealing with the consequences of non-compliant reports
Other topics – including admission and quotation of securities, transactions by listed entities with persons in a position of influence, lodgement of documents by listed entities for release to the market and various other miscellaneous matters.
Submission on the proposals close on 27 May 2022 and the ASX intends the updated rules will take effect from 1 December 2022.