Clarity in financial reporting - June 2023 monthly newsletter

• Improve quality by addressing ASIC’s focus areas for 30 June 2023
• How to respond to the ‘Pillar Two’ amendments in June 2023 financial reports
• Understand enhanced supplier finance disclosures
• Helpful resources for June 2023 reporting

Improve quality by addressing ASIC’s focus areas for 30 June 2023

Consider and address ASIC’s focus areas in 30 June 2023 financial reports.

ASIC’s focus areas for 30 June 2023 financial reports call on directors, preparers and auditors to assess the impact of uncertain market and economic conditions on reporting for full and half-years endings on 30 June 2023.

ASIC expects investors to be properly informed about “the impact of changing and uncertain economic and market conditions, ‘net zero’ targets and other developments on financial position and future performance”.

Changes from the prior period include:

• An explicit focus on ‘net zero’ targets and their impacts on financial reporting, which follows on from ASIC’s continued focus on greenwashing
• Expansion of the discussion on impairment, covering market capitalisation being an indicator of impairment (but not a representation of the fair value of the business) and cross checks (consistent with earlier surveillance outcomes)
• Ensuring expected credit losses (ECLs) on loans and receivables consider accurate aging, use forward looking assumptions and adequately factor in future losses
• Addressing the impact of AASB 17 Insurance Contracts, including in half-year reports where mandatory application is required.

More information:

• ASIC media release 23-149MR ASIC highlights focus areas for 30 June 2023 reporting.

How to respond to the ‘Pillar Two’ amendments in June 2023 financial reports

Include the impacts of the recently finalised IASB ‘Pillar Two’ amendments in June 2023 financial reports.

The IASB released International Tax Reform – Pillar Two Model Rules in late May 2023, addressing accounting implications of the OECD ‘Pillar Two’ global minimum tax being implemented by over 130 countries globally, including in Australia and New Zealand. We expect the AASB to make equivalent amendments before the end of June 2023.

The amendments prohibit the recognition or disclosure of information about deferred taxes related to Pillar Two income taxes. This exception to the recognition and disclosure of deferred taxes applies immediately on issue on a retrospective basis.

Entities must disclose that they have applied the exception, including at 30 June 2023. Once Pillar Two legislation is substantively enacted, additional disclosures about the impact of Pillar Two on the entity will be required until such time as the legislation applies to the entity. The entity will then separately disclose the amount of current tax arising from Pillar Two taxes.

Read our Clarity publication Responding to Pillar Two to help you to understand and apply the amendments. The publication explains the amendments, outlines how they relate to the Pillar Two transition process, and provides illustrative disclosures for financial reports around the impacts of Pillar Two.

More information:

• Clarity publication Responding to Pillar Two
• iGAAP in Focus IASB amends IAS 12 to introduce a temporary exception from accounting for deferred taxes arising from OECD Pillar Two model rules.

Understand enhanced supplier finance disclosures

Review existing disclosures in light of recently introduced requirements and prepare for their mandatory introduction in 2024-25.

Amendments to IFRS® Accounting Standards issued by the IASB in late May 2023 introduce additional disclosure requirements around supplier finance arrangements in financial reports. The amendments are designed to extend and enhance the disclosures discussed in a December 2020 agenda decision of the IFRS Interpretations Committee.

The amending standard, Supplier Finance Arrangements, makes amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to introduce a new disclosure objective focused on user assessment of the effects of supplier finance arrangements on an entity’s liabilities and cash flows and on the entity’s exposure to liquidity risk.

We expect the AASB to make equivalent amendments before the end of June 2023. The amendments are applicable to annual reporting periods beginning on or after 1 January 2024.

Supplier finance remains a significant focus of users, regulators and standard-setters. Given the market interest in this topic, entities may consider adopting some or all of the new disclosure requirements in the June 2023 and December 2023 reporting periods, even though the disclosures are not mandatory for these reporting periods. Tier 1 financial reports will need to include disclosure about any material impacts of the amending standard where it is not early adopted.

More information:

• IASB media release IASB increases transparency of companies’ supplier finance
• iGAAP in Focus IASB amends IAS 7 and IFRS 7 to address supplier finance arrangements.

Helpful resources for June 2023 reporting

Access the following new resources on www.deloitte.com/au/models shortly:

• Tier 1 financial reporting checklist – Complete this checklist to ensure financial statements comply with IFRS Accounting Standards. This checklist also covers additional Australian-specific presentation and disclosure requirements
• Tier 2 presentation and disclosure checklist – Use this checklist to improve the quality of Simplified Disclosure financial statements at 30 June 2023. Focused on post-transition entities, this edition removes the specific transitional requirements that applied in previous years but retains relevant tailoring questions to make completion more efficient

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