Skip to main content

Clarity in financial reporting - September 2022 monthly newsletter

Simplified Disclosures update and reminder, financial reporting deadlines extension finalised, 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

In this issue

Key actions

  • Simplified Disclosures update and reminder
  • Financial reporting deadlines extension for unlisted entities now effective

Key developments

  • Two minute update


Key actions

Why does it matter? The current reporting season represents the first period involving 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).

Why now?

There can be substantial effort required to transition to the new requirements. Our experience to date has shown implementation challenges in the following areas:

  • Whether financial statements prepared under a non-legislative requirement (e.g. the entity’s constitution, a loan agreement or other document) are within scope of the new requirements
  • The requirement for ultimate Australian parent entities to prepare consolidated financial statements (unless they are an investment entity), including the transition process from unconsolidated to consolidated financial statements
  • Information gathering required to provide the required disclosures under AASB 1060
  • Sensitivities around particular disclosures that are required AASB 1060, e.g. related party transactions, key management personnel compensation and the composition of revenue.

It is important that entities understand the requirements, how they are impacted and are aware of challenges.

What resources are available?

We have the following resources available to assist:

  • Tier 2 Simplified Disclosures 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.
  • Tier 2 presentation and disclosure checklist
  • 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. This has been recently updated to reflect recent changes to Australian Accounting Standards and to include additional example disclosures for entities transitioning to Simplified Disclosures where AASB 1 First-time Adoption of Australian Accounting Standards is not being applied
  • Clarity publication Removal 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
  • Our Special edition Client financial reporting update provides an overview of the Simplified Disclosure requirements and the transition process.

Why does it matter? ASIC has finalised a legislative instrument to enable unlisted entities to have longer to meet their financial reporting obligations at June 2022.

What’s happened?

As discussed in our August 2022 newsletter, ASIC announced that it would extend reporting deadlines for various unlisted entities reporting under the Corporations Act 2001 to respond to resourcing issues for the June 2022 reporting period. ASIC made ASIC Corporations (Amendment) Instrument 2022/719 on 7 September 2022 to give effect to the extensions by amending a number of Corporations Instruments.

The extension applies to unlisted entities with balance dates from 24 June 2022 to 7 July 2022 and generally provides an additional month for unlisted entities to meet their financial reporting obligations. In addition, a number of consequential amendments have been made to related instruments and deadlines.

Grandfathered proprietary companies

Unlike the one month extensions given by ASIC in previous periods, ASIC Corporations (Amendment) Instrument 2022/719 does not include a consequential amendment to ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840 to permit grandfathered proprietary companies an extra month to have their financial reports audited.

Since ASIC’s announcement of its intention to provide the one month extension, Treasury Laws Amendment (2022 Measures No. 1) Act 2022 repealed ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840 (effective for financial reporting periods ending on or after 10 August 2022) and prohibited ASIC from giving similar relief to entities within its scope.

ASIC Corporations (Amendment) Instrument 2022/719, which gives effect to the reporting deadline extensions, had not been made by the date ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840 was repealed. As a result, there are legal restrictions preventing ASIC from giving legal effect to a one month extension for the audit of the financial statements of grandfathered proprietary companies relying on the repealed instrument to obtain relief from lodging their June 2022 financial statements (as the instrument remains in effect for this period). ASIC has released an addendum to its original media release confirming that Treasury Laws Amendment (2022 Measures No.1) Act 2002 “prevents ASIC from making a class order that would continue the exemption for 24 June to 7 July 2022 year ends of companies that use the extended reporting deadlines granted by ASIC”.

As a result, the one month extension is not available to grandfathered proprietary companies wishing to take advantage of lodgement relief and such entities should ensure they comply with the requirements of ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840 as was in force before it was repealed. This requires the financial statements for the financial year to “have been audited before the deadline for reporting to members for that year”. In other words, such entities will have to send their audited financial statements to members within four months of the reporting date to avail themselves of lodgement relief. Where grandfathered proprietary companies wish to take advantage of the one month extension, they can do so, but will then be required to lodge their financial reports with ASIC.

New publication
To assist entities to understand the revised deadlines, we have published a Clarity publication Revised deadlines for unlisted entities at June 2022. This publication summarises the revised reporting deadlines under the Corporations Act 2001 for various entities and situations.

More information:

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

A summary of recent developments:

Global sustainability reporting developments

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

  • The IFRS Foundation Trustees have announced the completion of the recruitment of members to the International Sustainability Standards Board (ISSB) with the appointment of Jingdong Hua as a second Vice-Chair, effective October 2022. The ISSB now has its full 14 members
  • The IFRS Foundation have announced the appointment of seven organisations and representatives to the Sustainability Consultative Committee (SCC). The seven organisations join four permanent multilateral member organisations―the International Monetary Fund, the Organisation for Economic Co-operation and Development (OECD), the United Nations and the World Bank. The SCC will be a consultative and advisory forum that will contribute towards the ISSB’s goal of developing globally accepted and high-quality sustainability disclosure standards
  • We have published iGAAP in Focus European sustainability reporting: Worldwide reach of the Corporate Sustainability Reporting Directive, which outlines the near final text for the Corporate Sustainability Reporting Directive (CSRD) being implemented in the European Union (EU). The scope of the CSRD will extend beyond entities listed in an EU regulated market, including large EU undertakings and non-EU undertaking generating more than EUR 150 million net turnover and which have at least one EU subsidiary or EU branch meeting specific criteria. The CSRD could therefore impact Australian entities with operations in Europe and will become effective in stages starting from 1 January 2024 (with non-EU undertakings reporting for periods beginning on or after 1 January 2028).
Subscribe to our monthly Clarity newsletter Subscribe here 
Clarity in financial reporting newsletters
Our latest reports and thought leadership

Did you find this useful?

Thanks for your feedback

If you would like to help improve further, please complete a 3-minute survey