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Clarity in financial reporting - May 2022 monthly newsletter

Updated Tier 1 models and Australian financial reporting guide, new transitional relief for Simplified Disclosures and more

Our monthly Clarity in financial reporting newsletter informs you of key focus areas in financial reporting for the month: actions, developments, and dates

Key actions

Tier 1 models and reporting considerations publication

Why does it matter? 

Now is a great time to address considerations and issues for the upcoming June 2022 reporting season.

Our Tier 1 models and reporting considerations publication assists entities with public accountability and those choosing to prepare Tier 1 financial statements with an illustrative guide when developing disclosures for the June 2022 reporting season.

The publication also provides an easy-to-read and focused summary of key considerations for the June 2022 reporting season, including our popular ‘What’s new in financial reporting’ analysis.

The publication has the following sections:

  • Using this publication – provides an overview of using the document as a guide in achieving best practice outcomes in Tier 1 annual reports
  • Key considerations for 30 June 2022 – contains pertinent information for financial reporting at 30 June 2022, including what’s new for the current reporting season, a summary of new and revised pronouncements and reporting deadlines
  • Core model financial statements – contains the core disclosures that apply to financial statements prepared in accordance with IFRS® Accounting Standards (and their Australian equivalents)
  • Appendix 1 – gives an overview of the disclosure areas impacted by climate change and COVID 19
  • Appendix 2 – includes the various reports required under the Corporations Act 2001, additional Australian disclosures, ASX Listing Rules requirements and ACNC requirements.

More information: Tier 1 models and reporting considerations

Updated guide to Australian financial reporting

Why does it matter? Understanding the Australian financial reporting framework helps to ensure entities meet their legal obligations.

We’ve released the 11th edition of our Australian financial reporting guide. The publication is a ‘one stop shop’ for answering your questions about financial reporting – when financial reports are required, how to apply the Australian differential reporting framework, the different types of financial statements, the involvement of regulators and markets, and more.

In this edition we’ve made updates:

  • Reflecting the removal of the reporting entity concept and introduction of the Simplified Disclosures framework
  • Including additional guidance on the financial reporting requirements for entities registered with the Australian Charities and Not-for-Profit Commission (ACNC)
  • Introducing guidance for the financial reporting aspects of the new corporate collective investment vehicle (CCIV) regime introduced into the Corporations Act 2001, which is effective from 1 July 2022
  • Including overviews of Tax Transparency Code reporting and the Payment Times Reporting Scheme
  • For newly issued pronouncements and other guidance, and providing further examples, information and explanation of key requirements.

More information: Australian financial reporting guide

AASB finalises transitional relief for Simplified Disclosures

Why does it matter? Newly finalised amendments will ease transition for entities moving to Simplified Disclosures (AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities)

The AASB has issued AASB 2022-2 Amendments to Australian Accounting Standards – Extending Transition Relief under AASB 1, which implements amendments to the following standards agreed at the AASB February 2022 meeting:

The amendments provide entities with an option to measure assets and liabilities at the carrying amounts that would be included in a parent’s consolidated financial statements where a parent adopted IFRS Accounting Standards in an earlier period. Similar amendments permit a parent to adopt carrying amounts in a subsidiary, joint venture or associate’s separate financial statements where the entity adopted IFRS Accounting Standards in an earlier period (previously these requirements referred to Australian Accounting Standards but now additionally refer to IFRS Accounting Standards)

These amendments clarify that an entity that previously prepared unconsolidated general purpose financial statements under Reduced Disclosure Requirements (RDR) on the basis the entity was not a reporting entity can apply AASB 1 or AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors on transition to Simplified Disclosures.

The amendments will be beneficial for entities transitioning to Simplified Disclosures (AASB 1060).

The AASB 1 amendments will permit a limited ‘push down’ or ‘push up’ of carrying amounts to streamline group reporting, particularly for subsidiaries of foreign entities applying IFRS Accounting Standards.

The amendments to AASB 1053 will be beneficial for country-by-country (CBC) reporting entities that prepared unconsolidated GPFS in accordance with RDR on the basis the entity was not a reporting entity. As the reporting entity concept has been removed for many for-profit entities with effect from annual reporting periods beginning on or after 1 July 2021, there was uncertainty whether AASB 10 Consolidated Financial Statements should be retrospectively applied on transition from unconsolidated RDR to consolidated Simplified Disclosures financial statements. The amendment clarifies that these entities can apply AASB 1 or AASB 108 on transition and so take advantage of the exemptions available in AASB 1.

AASB 2022-2 applies to annual reporting periods ending on or after 30 June 2022 (to coincide with the first-time mandatory adoption of AASB 1060).

More information: Clarity publication Simplified Disclosures – Transition options and opportunities, AASB media release.

Key developments

Two minute update

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:

The AASB has issued AASB 2022-3 Amendments to Australian Accounting Standards – Illustrative Examples for Not-for-Profit Entities accompanying AASB 15, which adds an additional example to AASB 15 Revenue from Contracts with Customers to clarify the treatment of upfront fees by not-for-profit entities (such as joining fees for clubs and enrolment fees at schools). The amendments apply to annual reporting periods beginning on or after 1 July 2022.

The Basis of Conclusions also notes that a decision on removing the accounting policy choice of cost or fair value for the initial measurement of right-of-use assets arising under concessionary leases should be deferred until additional guidance on how to measure the fair value of such right-of-use assets is discussed.

The International Sustainability Standards Board (ISSB) has announced the formation of a new working group to discuss enhanced compatibility between the ISSB’s activities and ongoing jurisdictional initiatives on sustainability disclosures. As a number of jurisdictions have recently issued sustainability disclosure proposals, the working group will explore how the proposals interact with the proposed ‘global baseline’ in the ISSB’s exposure drafts.

Published : May 2022

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