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Clarity in financial reporting - October 2022 monthly newsletter

Updated model special purpose financial statements, updated Form FS70 for AFS licensees, director ID reminder 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

Updated model special purpose financial statements available

Why does it matter? Our new model special purpose statements can assist entities preparing special purpose financial statements.

We’ve released the 17th edition of our model special purpose financial statements, which includes illustrative examples and discussion of:

  • Recent proposed changes to professional requirements in special purpose financial statements arising under APES 205 Conformity with Accounting Standards
  • The recently introduced disclosures in certain for-profit private sector special purpose financial statements (essentially, those entities with a non-legislative requirement to prepare financial statements in accordance with Australian Accounting Standards, where the requirement was created and last amended before 1 July 2021)
  • The new required disclosures in special purpose financial statements of not-for-profit entities reporting to the Australian Charities and Not-for-Profit Commission (ACNC).

These disclosures will assist entities completing their special purpose financial statements for the June 2022 and later financial reporting periods.

More information: Model special purpose financial statements

ASIC releases new Form FS70 for AFS licensees

Why does it matter? The reissued Form FS70 codifies ASIC’s intention that intermediate parent entities holding an Australian financial services (AFS) licence are not required to prepare consolidated and parent entity financial statements under Chapter 7 of the Corporations Act 2001.

What’s happened?

AFS licensees are required to report under Chapter 7 of the Corporations Act 2001 in addition to any financial reporting requirements under Chapter 2M of the Act. The requirements for these entities are outlined in Form FS70 Australian financial services licensee profit and loss and balance sheet.

Form FS70 was reissued on 1 July 2022 and effectively required any licensee that had "control of an investee" within the meaning of AASB 10 Consolidated Financial Statements to present both parent entity and consolidated financial statements.

ASIC subsequently clarified (through a FAQ document) that Form FS70 was "not intended to override the exemption" in AASB 10 where it would otherwise apply. The updates to Form FS70 released on 19 September 2022 completed the process of implementing this intention and removes any doubt in interpretation.

ASIC also published Financial reporting and audit: Frequently asked questions (FAQs) on its website providing responses to a number of frequently asked questions about the changes (among other topics).

Updated publication

We have updated our Clarity publication New financial reporting requirements for AFS licensees to incorporate the effect of these developments. We recommend AFS licensees refer to this updated publication.

Reminder on director identification numbers

Why does it matter? Important deadlines are coming up in relation to the requirements for all directors to obtain a director identification number (Director ID).

Requirements for Director IDs

As discussed in our November 2021 newsletter, a person appointed as a director of a body corporate registered under the Corporations Act 2001 or the Corporations (Aboriginal and Torres Strait Islander) Act 2006 must apply to Australian Business Registry Services (ABRS) for a Director ID.

Deadlines for directors under the Corporations Act 2001

Where a person became a director under the Corporations Act 2001 on or before 31 October 2021, the deadline to apply for a Director ID is 30 November 2022. All directors appointed under the Corporations Act 2001 after 31 October 2021 must already be registered and new directors must obtain a Director ID prior to being appointed.

The requirement to register includes executives acting as directors of subsidiaries within groups, directors of charities and not-for-profit entities incorporated as companies limited by guarantee (or otherwise), directors of companies that are responsible for managed investment schemes, and directors of entities that do not have a reporting obligation under the Corporations Act 2001 (e.g. certain small proprietary companies).

Deadlines for directors under the Corporations (Aboriginal and Torres Strait Islander) Act 2006

Registrations of a person who is a director under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 is subject to a transitional process:

  • If the person becomes a director on or before 31 October 2022, the deadline to apply is 30 November 2023
  • If the person becomes a director from 1 November 2022, the person must apply for a Director ID prior to appointment.

More information: Australian Business Registry Services website.

Key developments

Two minute update

Why does it matter? Being aware of recent developments allows a timely and informed response.

A summary of recent developments:

The AASB has published a Discussion Paper Development of Simplified Accounting Requirements (Tier 3 Not-for-Profit Private Sector Entities) as a first step in revising the not-for-profit private sector financial reporting framework.

The paper proposes a stand-alone accounting standard with some simplified accounting requirements. The broader project will also consider removing the ability of not-for-profit entities to prepare special purpose financial statements. Comments on the Discussion Paper close on 31 March 2023.

Recent updates on progress toward new global sustainability reporting disclosure standards:

  • ISSB September 2022 meeting – The International Sustainability Standards Board (ISSB) met in Frankfurt on 20-23 September 2022. As this was a meeting to discuss feedback, the ISSB was not asked to make any decisions. Our IAS Plus meeting notes capture the main reflections of the ISSB members. Importantly, the ISSB supported the proposed redeliberation plan in respect of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. The ISSB will start to discuss specific issues in October 2022.
  • Council of Financial Regulators Climate Change Activity Stocktake 2022 – The Council of Financial Regulators (CFR) Working Group on Financial Implications of Climate Change announced, as part of its 2022/23 priorities, that CFR agencies (i.e. APRA, ASIC, RBA and Treasury) will continue to strengthen the building blocks needed to facilitate high-quality and comparable climate-related disclosures, “in line with the Government's commitment to introduce disclosure requirements aligned with international standards”. The document notes that CFR agencies will work towards ensuring that standards are developed and adopted in a way that is appropriate for the Australian regulatory and economic context. 

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