Welcome to Beyond The Numbers, our monthly newsletter which brings you a summary of the latest developments from local and international standard setters and regulators.
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| Top Story |
| Local Reporting |
| Regulations |
| International News |
| In Case You Missed It |
AASB issues Exposure Draft on Climate-related Financial Disclosures
The AASB has issued ED SR1 Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information. The ED includes three proposed Australian Sustainability Reporting Standards (ASRS):
- [draft] ASRS 1 General Requirements for Disclosure of Climate-related Financial Information (based on IFRS S1)
- [draft] ASRS 2 Climate-related Financial Disclosures (based on IFRS S2); and
- [draft] ASRS 101 References in Australian Sustainability Reporting Standards (to incorporate relevant non-legislative documents, such as the Greenhouse Gas Protocol, in ASRS).
The draft ASRS standards will only address climate-related disclosures and so will not be identical to IFRS Sustainability Disclosure Standards IFRS S1 and IFRS S2. The AASB intends that ASRS Standards will apply to not-for-profit entities, although Treasury and regulators will ultimately decide on which entities will be required to ASRS Standards and the timetable for making those disclosures.
ED SR1 is open for comment until 1 March 2024.
Nexia’s publication analysing the proposals in ED SR1 will be available soon.
AASB issued Amendments to Australian Accounting Standards – Lack of Exchangeability
The AASB has issued AASB 2023-5 Amendments to Australian Accounting Standards – Lack of Exchangeability. The amending standard adds requirements to AASB 121 The Effects of Changes in Foreign Exchange Rates (August 2015) for an entity to determine whether a currency is exchangeable into another currency and, if it is not exchangeable, the spot exchange rate that must be used.
For Tier 2 entities that apply AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-For-Profit Tier 2 Entities, exemption from complying with the disclosure requirements of AASB 121 still applies.
The amendments apply for annual reporting periods beginning on or after 1 January 2025. Earlier application is permitted.
A director’s guide to mandatory climate reporting
The Climate Governance Initiative (CGI), in conjunction with the Australian Institute of Company Directors (AICD) has issued a guide to help directors understand and prepare for mandatory climate-related financial disclosures.
The guide explores:
- an overview of the current climate reporting landscape;
- The legal duties and expectations of directors; and
- provides practical steps that directors can take to meet their obligations to report on climate-related risks and opportunities.
CA ANZ launches new guide: Measuring social impact for better reporting
Chartered Accountants Australian & New Zealand (CA ANZ) has prepared reporting guidelines aimed at assessing the social contribution or impact of the for-purpose sector, encompassing charities, not-for-profit entities and social enterprises.
Beyond conventional financial reporting, the for-purpose sector may furnish to external stakeholders a measure of its performance based on social impact and outcomes to meet reporting obligations stipulated in funding agreements or to ensure compliance with regulatory mandates.
The guideline outlines several key steps, including: articulating the reporting objectives, understanding stakeholders and their needs, identifying and measuring outcomes, incorporating outcomes into meaningful reporting, and refining and expanding the measurement and reporting of outcomes.
Recent changes to the Corporations Act 2001
The Treasury Laws Amendment (Modernising Business Communications and Other Measures) Act 2023 amends the Corporations Act 2001 to enable all documents under the Act to be signed either in physical form or electronic form and for certain documents (including financial reports under Chapter 2M of the Act) to be sent in either hard copy or electronic form.
ASIC’s first integrated financial reporting and audit surveillance report for 12 months to 30 June 2023
ASIC released the result of its first integrated financial reporting and audit surveillance program.
Majority of the surveillance findings relate to insufficient disclosure of material business risks in the operating and financial review (OFR), impairment of assets, revenue recognition and other financial report disclosures. This report also included findings in relation to adequacy of disclosures regarding the possible impact of applying the new insurance accounting standard.
Insufficient OFR disclosure had the most findings on this report. ASIC’s Regulatory Guide 247 (dated August 2019) sets out comprehensive guidance for preparers in providing more meaningful information that shall be disclosed within this section.
AFS licensees’ reportable situations regime
ASIC Corporations and Credit (Amendment) Instrument 2023/589 modifies Australian Financial Services licensees’ obligation to report certain breaches from 20 October 2023. The Instrument permits licensees not to report a breach provided it:
- only impacts one person or, if it relates to a financial product, credit product, consumer lease, mortgage or guarantee that is, or is proposed to be, held jointly by more than one person, those persons;
- does not result in, and be unlikely to result in, any financial loss or damage to any person; and
- does not lead to, and is unlikely to lead to, any other reportable situation.
This amendment also extends the breach reporting timeframe for licensees from 30 days to 90 days.
International Accounting Standards Board (IASB) update – September 2023
In September 2023, the IASB addressed various agenda items, including Business Combinations — Disclosures, Goodwill, and Impairment. The Board decided to set a comment period of 120 days for the Exposure Draft of proposed amendments for IFRS 3 Business Combinations and IAS 36 Impairment of Assets.
The proposed amendments for IFRS 3 require an entity to disclose more information on the financial statements to help its users to understand the benefits that an entity expected from a business combination when agreeing the purchase price and the extent to which the entity's objectives for the combination are being realised.
Conversely, the amendments to IAS 36 eliminate constraints on cash flows used in calculating value in use (VIU), permitting inclusion of cash flows from future, uncommitted restructuring efforts or asset performance enhancements. Furthermore, post-tax cash flows and post-tax discount rates may now be employed in VIU calculations, with requisite disclosure in the financial report.
Details of other topics and IASB’s work plan updates can be found on the IASB website.
International Accounting Standards Board (IASB) update – October 2023
In October 2023, the IASB considered various agenda items.
The Board tentatively decided on the following matters in relation to a proposed new Standard IFRS 18 Presentation and Disclosure in Financial Statements which will replace IAS 1 Presentation of Financial Statements:
- In the Statement of Profit or Loss – a requirement to classify income and expenses within in one of five categories (operating, investing, financing, income tax and discontinued operations); and
- In the Statement of Financial Position – classification of assets and liabilities into separate line items is determined by their characteristics of nature and function.
The Board tentatively resolved not to provide any transitional relief for the retrospective application of IFRS 18.
The Board also approved the finalisation of the following IFRIC agenda decisions:
- Premiums Receivable from an Intermediary (IFRS 17 and IFRS 9);
- Homes and Home Loans Provided to Employees; and
- Guarantee over a Derivative Contract (IFRS 9).
The Agenda Decisions will be published on the IASB website soon.
International Sustainability Standards Board (ISSB) meeting – October 2023
A summary of the ISSB meeting held on 24-25 October is available. The ISSB discussed:
- Enhancing the international applicability of the SASB Standards to serve as a primary source of guidance for applying IFRS S1;
- The development of educational materials to support the application of IFRS S1 and IFRS S2; and
- Co-ordinating the work programmes and standard-setting activities of the ISSB and the Global Sustainability Standards Board (GSSB).
Guidance for Public Benevolent Institutions
The Australian Charities and Not-for-Profits Commission (ACNC) published a Commissioner’s Interpretation Statement on Public Benevolent Institutions to provide charities with a more extensive guidance on whether and how they qualify to be Public Benevolent Institutions (PBI).
PBI is a charity subtype that provides gateway to charity tax benefits, including access to deductible gift recipient status.
To qualify as a PBI, a charitable entity must satisfy three key criteria: it must be public, benevolent, and organised as an institution. In this context, "public" denotes that the entity aligns with the definition of 'charity' as outlined in the Charities Act 2013 (Cth), and the recipients it seeks to assist constitute an appreciable section of the community.
Additionally, the charity's primary objective must be the relief of poverty, sickness, destitution, helplessness, suffering, misfortune, disability, or distress.
