Why does it matter? Entities must ensure they respond to ASIC’s expectations in financial reporting for the June 2022 reporting season.
Following the release of ASIC’s focus areas for 30 June 2022 financial reports discussed in our June 2022 newsletter, ASIC has also announced the findings of its review of financial reports for 31 December 2021:
ASIC reviewed 70 listed entity financial reports, ten of which were IPOs in the past 18 months
ASIC made inquiries of 18 entities on 31 matters. Ten related to insufficient disclosure of business risks in the operating and financial review (32%) and seven related to recoverability of asset values (23%)
Recognition of restoration and lease make-good provisions, revenue recognition, expense deferral, and classification of debt as current or non-current also continue to be areas of inquiry.
In a separate media release, ASIC has again encouraged directors and senior management of listed companies and their advisors to continue reporting voluntarily under the Task Force on Climate-Related Financial Disclosures (TCFD) framework.
To assist entities to understand and respond to ASIC’s expectations in light of current economic conditions, we have published a Clarity publicationResponding to ASIC areas of focus. This publication brings together the critical financial reporting themes in an easy to read format grouped by four overarching themes: impairment and asset values, liability, revenue and other matters, going concern and subsequent events, and disclosure.
Why does it matter? Our financial reporting checklists are a key compliance tool for financial reporting.
We’ve released updated checklists for the June 2022 reporting season:
Tier 1 financial reporting checklist – This checklist may be used as a guide to assist in considering compliance with the requirements of Australian Accounting Standards and IFRS® Accounting Standards for 'Tier 1' financial statements (as defined in AASB 1053 Application of Tiers of Australian Accounting Standards)
Tier 2 presentation and disclosure checklist – This checklist includes the presentation and disclosure requirements of AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities and other relevant Australian Accounting Standards
IAS 34 compliance checklist 2022 – This global checklist (available on IAS Plus) sets out the requirements in IAS 34 Interim Financial Reporting and can assist in ensuring compliance with AASB 134 Interim Financial Reporting in half-year financial reports.
ASIC finalises financial reporting changes for AFS licensees
Why does it matter? Australian financial services (AFS) licensees need to be aware of the new financial reporting requirements which will need to be applied by most AFS licensees at 30 June 2022 and which have now been enacted through modifications to Form FS70.
ASIC has updated Form FS70Australian financial services licensee profit and loss statement and balance sheet to give effect to the new financial reporting requirements applying from 1 July 2021 discussed in our June 2022 newsletter.
The key developments are:
Requiring all AFS licensees to prepare general purpose financial statements (GPFS)
ASIC viewing all AFS licensees holding client monies as having public accountability and so they must prepare Tier 1 GPFS
Requiring a number of specified categories of ‘large or sophisticated’ licensees to prepare Tier 1 GPFS
Confirming that all AFS licensees are required to present a statement of cash flows in all cases
Requiring all AFS licensees with controlled entities to present both consolidated and parent entity information when submitting financial statements in accordance with Form FS70
Providing transitional relief to some entities for their first financial year reporting under the new requirements, and in respect of comparative information in their initial or subsequent financial year.
The application of the requirements and the transitional provisions can be complex. In order to assist AFS licensees understand and apply the new requirements, we have published Clarity publication New financial reporting requirements for AFS licensees. The publication:
Provides a summary of the new financial reporting requirements
Explains how the requirements of Form FS70 are applied in practice, including flowchart decision trees for licensees reporting under Chapter 7 and Chapter 2M of the Corporations Act 2001
Responds to a number of frequently asked questions.
Additional disclosures in certain special purpose financial statements at 30 June 2022
Why does it matter? Certain entities preparing special purpose financial statements (SFPS) at 30 June 2022 need to be aware of new disclosures requirements recently introduced by the AASB.
In late June, the AASB issued AASB 2022-4Amendments to Australian Accounting Standards – Disclosures in Special Purpose Financial Statements of Certain For-Profit Private Sector Entities to introduce new disclosures into AASB 1054 Australian Additional Disclosures. The amendments apply to annual periods ending on or after 30 June 2022 and so will apply in the current reporting season.
Which entities are affected?
Not all SPFS are required to include the new disclosures.
The new disclosures are only required in a specified type of SPFS, being those of for-profit private sector entities that have a non-legislative requirement that:
Was created and last amended before 1 July 2021
Requires the preparation of financial statements in accordance with Australian Accounting Standards.
In other words, the new requirements apply to for-profit entities that are exempt from the requirement to prepare general purpose financial statements due to the removal of the reporting entity concept.
Example of entities that may be impacted include:
Trusts, partnerships, co-operatives and similar entities that only have a non-legislative requirement through their constitution or similar document to prepare financial statements in accordance with Australian Accounting Standards
Entities that only have an obligation to prepare financial statements that comply with Australian Accounting Standards under a loan or other agreement.
What disclosures are required?
The following disclosures are introduced into AASB 1054 Australian Additional Disclosures and are required in SPFS that are within scope:
The basis on which the decision to prepare SPFS was made
Material accounting policies applied in the SPFS, including the measurement bases applied and other accounting policies that are relevant to an understanding the financial statements
Information about material changes in accounting policies (in a similar way to that required by AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors)
Where the entity has interests in other entities, whether subsidiaries have been consolidated and interests in joint ventures and associates have been equity accounted and if not, the reasons why
For material accounting policies applied and disclosed in the financial statements that do not comply with the recognition and measurement requirements of Australian Accounting Standards (except for AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures), and indication of how those accounting policies do not comply
Whether or not the financial statements overall comply with the recognition and measurement requirements of Australian Accounting Standards (other than AASB 10 and AASB 128).
The amendments include implementation guidance illustrating the disclosures for various entities.
The new disclosures are similar to those already required in SPFS of not-for-profit entities. The disclosures may optionally be included in other SPFS, although similar disclosures are already be required under APES 205Conformity with Accounting Standards in most cases.
What action is required?
Impacted entities should include the necessary disclosures in their 30 June 2022 and later SPFS.
AASB 2022-4Amendments to Australian Accounting Standards - Disclosures in Special Purpose Financial Statements of Certain For-Profit Private Sector Entities
A summary of topics you need to know about. For a summary of international developments, see IFRS on Point
Two minute update
Why does it matter? Being aware of recent developments allows a timely and informed response.
A summary of recent developments:
APESB proposals on special purpose financial reporting
The Accounting Professional & Ethical Standards Board Limited (APESB) has released proposals to amend APES 205 Conformity with Accounting Standards to respond to recent changes to the Australian financial reporting framework, including the removal of the reporting entity concept, new disclosures in special purpose financial statements of certain entities (including the new disclosures discussed above) and forthcoming changes to accounting policy disclosure.
The APESB does not propose to align disclosures required by APES 205 in SPFS with disclosures required under Australian Accounting Standards on accounting policies and the nature of the reporting framework, but does propose to exempt entities with disclosure obligations about SPFS under AASB 1054 Australian Additional Disclosures from the disclosures about SPFS in APES 205. Comments on the proposals close 15 August 2022. More information is available in the APESB Technical Alert.
ASIC amends rounding instrument
ASIC has made an amending instrument that amends ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 to accommodate the introduction of Simplified Disclosures, and to permit a sub-fund of a corporate collective investment vehicle (CCIV) to also round amounts in accordance with the instrument. The changes are effective from 28 June 2022.
AASB Project Insights on sustainability reporting in Australia
The AASB has published a staff article that provides an overview of the AASB’s proposed approach to developing sustainability-related financial reporting standards in Australia and highlights some of the key elements of the proposed approach.
Global sustainability reporting developments – Recent updates on progress toward new global sustainability reporting disclosure standards:
The IFRS Foundation Trustees have announced two further appointments to the International Sustainability Standards Board (ISSB). The appointments mean the board now has a quorum and the ISSB will meet for the first time in the week commencing 18 July 2022
The IFRS Foundation and Value Reporting Foundation (VRF) have voted to consolidate the VRF into the IFRS Foundation, meaning the work of the IFRS Foundation will be informed by the SASB Standards and Integrated Reporting Framework. The process is expected to be completed by 1 August 2022
The ISSB and Global Reporting Initiative (GRI) have announced further information about how their previously announced Memorandum of Understanding (MoU) will be implemented.