Welcome to our inaugural edition of Beyond the Numbers, our monthly newsletter bringing you a summary of the latest developments from local and international standard setters and regulators.
Click on one of the Newsletter sections below:
| Top Story |
| Local Reporting |
| Regulations |
| International News |
| In case you missed it |
Accounting for Cloud Computing Arrangements
Companies often pay a fee to access cloud computing (SaaS) arrangements and incur additional costs to configure and/or customise those services to their own specific requirements. Our publication explains the appropriate accounting for configuration and customisation costs in a cloud computing arrangement.
Income of Not-for-Profit Entities and Right-of-Use Assets arising under Concessionary Leases
AASB has issued ED 318 which proposes amendments to Illustrative Example 7A to clarify the accounting for upfront fees in AASB 15 Revenue from Contracts with Customers by not-for-profit entities and to amend Illustrative Example 3 to clarify the analysis regarding the recognition of a financial liability in AASB 1058 Income of Not-for-Profit Entities. The amendments would apply to annual periods beginning on or after 1 July 2022.
The Exposure Draft also documents the AASB’s proposed intention to retain the accounting policy choice in AASB 16 Leases for not-for-profit private sector lessees to elect to initially measure a class of concessionary right-of-use assets at cost or fair value.
Fair Value Measurement for Not-for-Profit Entities
The AASB intends to modify the basis for measuring the fair value of non-financial assets of not-for-profit public sector entities held primarily for their service capacity rather than their ability to generate net cash inflows.
Tier 3 NFP reporting framework
The AASB continues its work on developing a simplified recognition and measurement framework for smaller NFP reporting entities. The Board has already made a number of tentative decisions regarding the structure of Tier 3 financial statements, the choice to prepare consolidated financial statements, and that leases would be recognised as an expense on a straight-line basis over the lease term (ie, the previous AASB 117 lease model).
COVID-19 resources
The AASB has dedicated web pages that house various internal and external resources as they pertain to COVID-19 and its effects on financial reporting. These pages include Staff FAQs addressing various common accounting questions arising as a result of COVID-19.
ASIC focus area
ASIC released its focus areas for 31 December 2021 financial reports, including how COVID-19 is impacting companies’ operating conditions and their effects on accounting estimates and judgements, and the disclosure of material business risks in the Operating and Financial Review (OFR). Reference is also made to ASIC’s COVID-19 implications for financial reporting and audit frequently asked questions (FAQs).
ASIC lodgment extension
The deadline for unlisted entities with balance dates from 24 December 2021 to 7 January 2022 (inclusive) to lodge their financial reports has been extended by one month by ASIC Corporations (Amendment) Instrument 2021/976. The extension is automatic and entities do not need to apply in order to benefit from this relief.
ACNC size thresholds increased
The size thresholds which require charities to lodge audited or reviewed financial reports to the ACNC have been increased from the 2021-22 financial year.
In addition, from 2021-22 certain charities will be required to include Key Management Personnel (KMP) remuneration disclosures, and from 2022-23 disclose other related party transactions, in their annual financial statements.
NSW Modern Slavery Act
The Modern Slavery Act 2018 (NSW) commenced on 1 January 2022. It was amended to remove the requirement for NSW entities with consolidated revenue between $50-$100 million per annum to prepare an annual modern slavery statement.
The only reporting requirement exists within the Modern Slavery Act 2018 (Cth). Entities need to report annually under the Commonwealth Act if they are an Australian entity or carry on business in Australia and have a minimum annual consolidated revenue of $100 million.
NSW extends small business COVID-19 rent relief
The NSW government has extended rent negotiation rights for commercial tenants with an annual turnover less than $5 million to 13 March 2022. Regulations require landlords to provide rent relief in proportion to their tenant’s decline in turnover and extend other provisions.
Victoria extends small business COVID-19 rent relief
The Victorian government has extended the Commercial Tenancy Relief Scheme until 15 March 2022 to support small businesses with a turnover of $10 million or less that continue to be impacted by COVID-19.
Non-current Liabilities with Covenants
The IASB has issued ED/2021/9 Non-current Liabilities with Covenants which proposes amendments to IAS 1 to specify that covenants that are required to be met only within twelve months after the reporting date:
- do not affect the classification of a liability as current or non-current;
- such liabilities must be presented separately on the face of the balance sheet; and
- details of those covenants are to be disclosed in the notes.
Submissions on ED/2021/9 close on 21 March 2022.
Demand Deposits with Restrictions on Use
The IFRS Interpretation Committee considered a scenario where an entity has a contractual obligation with a third party to keep a specified amount of cash in a separate demand deposit and to use the cash only for specified purposes. The Committee tentatively concluded that restrictions on the use of a demand deposit did not result in the deposit no longer being classified as cash. A final agenda decision is expected soon.
January 2022 IASB meeting
The IASB meeting held on 25 January 2022 considered:
- Feedback on its Discussion Paper exploring possible options in accounting for business combinations under common control;
- Proposals relating to disclosures of management performance measures in financial reports; and
- Proposed amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates to address circumstances where there is a lack of exchangeability between two currencies.
Example School SDS Financial Report
Nexia has released its SDS School Example Limited illustrative financial report for the year ended 31 December 2021. The financial report illustrates a fictitious independent school adopting the Tier 2 Simplified Disclosure Standard, AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities, and reporting under the Australian Charities and Not-for-profits Commission Act 2012.
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If you would like to discuss further any of the information provided in these updates and how it may impact you, please contact your Nexia Advisor.
