Why does it matter? Entities must ensure they respond to ASIC’s expectations in financial reporting for the June 2022 reporting season.
ASIC has released its focus areas for financial reports for the upcoming reporting season.
ASIC highlights the following key focus areas for 30 June 2022 financial reporting periods:

• Asset values - impairment of non-financial assets, values of property assets, expected credit losses on loans and receivables and values of other assets (including inventories in light of the IFRIC agenda decision and the probability assessment for deferred tax assets)
• Provisions - expanding specific concerns to include the adequacy of lease property make good and mine site restoration provisions in addition to onerous contracts, financial guarantees and restructuring highlighted in previous periods
• Solvency and going concern assessments - including updating the broader list of matters that may impact these assessments (the list of matters is also relevant to asset values, provisions, current and future performance and impacts on business strategies)
• Events occurring after year end and before completing the financial report - consistent with prior periods, events after year end should be reviewed to determine whether they relate to the current reporting period or new conditions requiring disclosure
• Disclosures in the financial report and operating and financial review (OFR) - including disclosing in the OFR on the most significant business risks at the whole-of-entity level and a discussion of environmental, social and governance risks.

Overall, the focus areas are largely consistent with prior periods, with the following additional changes:

• A de-emphasising of the impacts of COVID-19 in favour of broader concerns including the impact of rising interest rates and oil prices, geopolitical risks (including the Ukraine/Russia conflict), the discontinuation of government and other support, changes in customer behaviour and skilled staff availability and expertise
• Greater emphasis on the disclosure of environmental, social and governance risks and ensuring consistency between disclosures in the OFR and any voluntary disclosures (such as those given under the Task Force on Climate-related Financial Disclosures)
• New focus areas including disclosure of material penalties for non-compliance with sanctions imposed in Australian or elsewhere in relation to Russia, and the recognition of assets, liabilities, income and expenses in registered scheme balance sheets and income statements where individual scheme members have pooled interests in assets and returns with some or all other members in substance.

More information: ASIC media release 22-124MR ASIC highlights focus areas for 30 June 2022 reporting.

Why does it matter? Our recent Client financial reporting updates covered essential topics to be considered in the June 2022 reporting season.

Our May 2022 Client financial reporting update was a presentation by leading specialists in financial reporting from our Accounting Technical team, our audit practice and external regulator (Australian Charities and Not-for-profits Commission ‘ACNC’).

We shared thoughts and lessons learnt from the recent reporting season as well as discussing current reporting issues.

For this update, we held separate sessions for the for-profit and not-for-profit sectors.

You can view a recording of the webcasts and download the presentations on our website.

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 – particularly that many such entities will be required to prepare ‘Tier 1’ general purpose financial statements.

ASIC has announced new financial reporting obligations for AFS licences. The new obligations follow the introduction of the requirement for general purpose financial statements for the majority of for-private private sector entities for financial reporting periods beginning on or after 1 July 2021.

The new ASIC requirements:
Require most AFS licences to prepare general purpose financial statements, including all such financial statements prepared under Chapter 2M of the Corporations Act 2001 and most financial reports prepared under Chapter 7 of the Corporations Act 2001

Deem many AFS licences to have "public accountability" which will be required to comply with all Australian Accounting Standards, i.e. prepare 'Tier 1' financial statements in full compliance with Australian Accounting Standards (this includes any AFS licensee that holds client monies). Accordingly, these entities will not be able to apply Australian Accounting Standards - Simplified Disclosures (AASB 1060 General Purpose Financial Statements - Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities) when preparing their financial statements

Require all AFS licences to prepare a cash flow statement

Require AFS licences with subsidiaries to prepare both single entity financial statements and consolidated financial statements ("four columns").

The new requirements apply to financial years beginning on or after 1 July 2021, but a deferral of one year is available to AFS licences that meet both of the following requirements:

• They prepared special purpose financial statements last year

• The special purpose financial statements were NOT prepared under Chapter 2M of the Corporations Act 2001 (in other words, were prepared for the purposes of Chapter 7 of the Corporations Act 2001).

Similar exemptions will be provided for certain licensees preparing financial reports under Chapter 2M to allow them to prepare Tier 2 financial statements even though Tier 1 financial statements would otherwise be required.

ASIC will update ASIC Form FS 70 Australian financial services licensee profit and loss statement and balance sheet to give effect to the new requirements. The new form is expected to be available by the end of June 2022.

For more information, see ASIC media release 22-128MR ASIC announces financial reporting changes for AFS licensees.

Why does it matter? The recent change in government may have direct and indirect impacts on corporate reporting.

The announced policies of the newly elected Labor government may have financial and corporate reporting impacts that may require consideration in June 2022 reports. For example, immediate considerations include:

Climate policy impacts – Labor’s stated climate policy should be taken into account in impairment testing, useful life assessments of assets, provision estimation and other relevant financial reporting areas. In addition, it may be more likely that some form of sustainability reporting framework may be implemented, reinforcing regulatory and investor expectations for such reporting in the near and medium terms

Changes to debt deduction rules – Labor’s stated policy on limiting debt-related deductions by multinationals may have impacts on the recognition of deferred taxes (once substantively enacted) and may also have more immediate impacts in terms of liquidity risk, capital management and similar disclosures if restructuring of Australian financing arrangements is anticipated in response to the proposals

Public reporting of tax information - Entities reporting under the Tax Transparency Code or s.3CA of the Tax Administration Act 1953 should consider the interaction with the Government’s intention to legislate the public release of high-level data about tax paid and employees in the jurisdictions in which they operate, alongside the number of employees working in each jurisdiction.

As these examples illustrate, entities need to familiarise themselves with likely regulatory developments that may have material impacts and ensure financial reporting considers any immediate implications in the upcoming busy season.

We will continue to bring you the financial reporting impacts of enacted measures and Federal Budgets as they occur.