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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ASIC Form FS70 for AFS Licensees amended
A revised ASIC Form FS70 Australian financial services licensee profit and loss statement and balance sheet was initially released on 1 July 2022 which required entities holding an Australian financial services (AFS) licence, that had control of an investee to present consolidated financial statements, in addition to its own financial statements.
This could be seen to conflict with paragraph 4(a) of AASB 10 Consolidated Financial Statements which provides an exemption from preparing consolidated financial statements for certain intermediate parent entities provided that certain criteria were met.
Through its Financial reporting and audit: Frequently asked questions (FAQs), ASIC has clarified that Form FS70 was not intended to override the exemption in paragraph 4(a) of AASB 10 and has amended Form FS70 accordingly.
Tier 3 Simplified Accounting for Not-for-Profit Private Sector Entities
The AASB’s Discussion Paper addresses a proposed Tier 3 general purpose financial reporting framework for NFP entities.
Tier 3 is designed to be relevant to smaller NFP entities, such as medium ACNC entities and other smaller NFPs reporting under other legislation, when the AASB removes the ability of NFPs to prepare special purpose financial reports.
The Discussion Paper proposes a number of simplified measurement and recognition requirements as an alternative to IFRS measurement and recognition, and reduced disclosures compared to Tier 2 general purpose financial statements.
Feedback on the proposals can be made either formally or via a survey and the AASB will be holding a series of virtual outreach events between November 2022 and March 2023 to discuss the proposals.
Submissions on the Discussion Paper close on 31 March 2023.
AASB issues fatal-flaw review draft standard: Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities
The AASB has issued a Fatal-Flaw Review Draft version of a proposed Standard that would amend AASB 13 Fair Value Measurement for application by not-for-profit public sector entities. Comments are due by 11 November 2022.
IASB amends classification of non-current debt with covenants
The IASB has amended IAS 1 to clarify that only conditions with which an entity is required to comply on or before the reporting date will affect the classification of a loan liability as current or non-current. Consequently, conditions that an entity has to comply with after balance date does not affect the classification of the liability.
It also introduces disclosure of information about those conditions that could cause loans to become repayable within twelve months after balance date.
IASB Update – October 2022
A summary is available of the IASB meeting held on 18-20 October 2022 which discussed a number of topics including:
- the Post-implementation Review of IFRS 9—Classification and Measurement. This included discussions on the disclosures relating to equity instruments and other comprehensive income as well as exploring possible narrow-scope amendments for electronic cash transfers.
- the proposed amendments to IFRS 7 Financial Instruments: Disclosures and IFRS 9 Financial Instruments on contractual cash flow characteristics of financial assets. This included a tentative proposal to add a requirement if IFRS 7 for entities to disclose for each class of financial assets and financial liabilities not measured at fair value.
- aspects of its preliminary views on the subsequent accounting for goodwill, set out in the Discussion Paper Business Combinations—Disclosures, Goodwill and Impairment. In particular, it discussed whether to retain the impairment-only model, which was the IASB’s preliminary view, or to explore reintroducing amortisation of goodwill.
IFRIC Update – October 2022
Three IFRIC Agenda Decisions have been finalised and published:
1. Lessor Forgiveness of Lease Payments in an operating lease
The Committee determined that a lessor accounts for the rent concession by applying:
- the derecognition requirements in IFRS 9 to forgiven lease payments that the lessor has recognised as an operating lease receivable; and
- the lease modification requirements in IFRS 16 to forgiven lease payments that the lessor has not recognised as an operating lease receivable.
2. Multi-currency Groups of Insurance Contracts
The Committee observed that an entity:
- applies all the measurement requirements in IFRS 17 to the group of insurance contracts, including the requirement to treat the group—including the contractual service margin—as a monetary item; and
- applies IAS 21 to translate at the end of the reporting period the carrying amount of the group—including the contractual service margin—into the entity’s functional currency at the closing rate.
3. Special Purpose Acquisition Companies (SPAC): Accounting for Warrants at Acquisition
The Committee observed that, among other things, the entity applies:
- IFRS 2 in accounting for instruments issued to acquire the stock exchange listing service; and
- IAS 32 in accounting for instruments issued to acquire cash and assume any liability related to the SPAC warrants—these instruments were not issued to acquire goods or services and are not in the scope of IFRS 2.
Where an entity’s accounting practices are inconsistent with an Agenda Decision they should be revised in a timely manner.
International Sustainability Standards Board (ISSB) Update
The ISSB met on 18-21 October 2022 when it discussed:
- its plan to redeliberate Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (draft S1) as well as the objective of draft S1 and some of its proposed requirements;
- key matters in draft S1 and Exposure Draft IFRS S2 Climate-related Disclosures (draft S2) that are important to achieving greater interoperability between the ISSB’s proposed global baseline and jurisdiction-specific requirements;
- proposals in draft S2 that would require an entity to disclose its Scope 1, Scope 2 and Scope 3 greenhouse gas (GHG) emissions; and
- recommendations and a draft plan to integrate industry-based materials into its work plan.
AASB Not-for-profit outreach events
The AASB are holding in-person outreach sessions in Sydney and Melbourne in February 2023 to obtain views from NFP stakeholders on Post-Implementation Reviews (PIRs) of Australian NFP pronouncements. The consultation sessions will seek views on the following topics:
- income recognition and measurement;
- control of an entity and consolidated financial statements;
- the definition of a structured entity;
- special purpose financial statements basis of accounting.
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Director ID deadline looms
Directors who were appointed on or before 31 October 2021 have until 30 November this year to apply for a Director Identification Number (Director ID). If you haven’t yet applied, you are strongly encouraged to do so now.
Other deadlines are:
- Intending new directors under the Corporations Act must apply (or have an existing Director ID) before their appointment;
- New directors appointed for the first time between 1 November 2021 and 4 April 2022 should have applied already – they had 28 days from their appointment to apply (unless they have an existing Director ID).
Directors of an Aboriginal or Torres Strait Islander corporation registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 who were appointed on or before 31 October 2022 have until 30 November 2023 to apply, while those appointed from 1 November 2022 must apply before their appointment.
There are significant criminal and civil penalties for failing to obtain a Director ID when required or misusing Director IDs.
For more information about who needs to apply and how, visit the Australian Business Registry Services website.
We’re here to support you.
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.
