Welcome to our final edition of Beyond The Numbers for 2022. Nexia Australia wishes all our readers a safe and happy festive season. Beyond The Numbers will be back in February 2023.
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Director ID application relief
Draft regulations have been issued to exclude persons who were a director on 4 April 2021 or were appointed between 4 April and 31 October 2021 and have ceased to hold any role as a director or alternate director prior to 1 December 2022 (for directors under the Corporations Act) or 1 December 2023 (for directors of indigenous corporations under the CATSI Act) from having to obtain a Director ID.
Persons in the above categories who become a director again after the transitional period will still need to obtain a Director ID prior to any subsequent appointment.
The final instruments are expected to be issued in December.
AASB expected to amend classification of non-current debt with covenants
At its meeting on 14-15 December, the Australian Accounting Standards Board (AASB) is expected to adopt amendments to AASB 101 Presentation of Financial Statements to clarify that only conditions (covenants) with which an entity is required to comply on or before the reporting date affects the classification of a loan liability as current or non-current. Covenants that an entity has to comply with after balance date does not affect the classification of the liability.
It will also introduce new disclosures of information about the conditions that could cause those loans to become repayable within twelve months after balance date.
Once issued by the AASB, the amendments can be adopted retrospectively prior to its mandatory application date of 1 January 2024. The amendments are expected to result in more bank loans and borrowings being classified as non-current liabilities.
AASB issues Post-implementation Review of income recognition of not-for-profit entities
The AASB is seeking feedback from not-for-profit stakeholders on implementation problems arising from the application of AASB 1058 Income of Not-for-profit Entities and AASB 15 Revenue from Contracts with Customers.
The AASB is seeking stakeholder feedback on the following areas:
- Sufficiently specific criterion and the legal interpretation of agreements;
- Capital grants;
- Difference between management accounts and statutory accounts and alternative revenue recognition models;
- Principal v agent, including the appropriate recognition of financial liabilities;
- Grants received in arrears;
- Termination for convenience clauses in grant agreements;
- Accounting for research grants; and
- Statutory receivables.
Comments to the AASB close on 31 March 2023.
AASB clarifies accounting for sale and leaseback transactions
The AASB has issued AASB 2022-5 which amends AASB 16 Leases to add subsequent measurement requirements for sale and leaseback transactions that satisfy the requirements in AASB 15 Revenue from Contracts with Customers to be accounted for as a sale.
AASB 16 already requires that a seller-lessee not recognise an amount of gain or loss on sale of an asset that relates to the right-of-use that it retains.
The amendments ensure that a similar approach is applied to the subsequent measurement of lease liabilities arising from a leaseback in a way that does not recognise any amount of the gain or loss related to the right-of-use it retains.
ASIC highlights focus areas for 31 December 2022 reporting
The Australian Securities & Investments Commission (ASIC) has highlighted a number of focus areas for attention by directors and preparers for 31 December 2022 financial reporting, in particular:
- Asset values, including impairment of non-financial assets, property values, and expected credit losses on loans and receivables;
- Recognition and measurement of provisions;
- Solvency and going concern assessments;
- Events occurring after year end and before completion of the financial report;
- Disclosures in the financial report and Operating and Financial Review (OFR).
ASIC focus on material business risk disclosures
ASIC is calling on company directors to ensure material business risks are adequately disclosed in the ‘Operating and Financial Review’ section of directors’ reports to better inform shareholders and prospective investors.
The Operating and Financial Review should highlight, analyse and provide a meaningful discussion of relevant information about an entity’s operations, financial position, and business strategies and prospects for future financial years.
ASX changes late lodgement rules
Currently, if an entity fails to lodge a periodic report before the Australian Securities Exchange’s (ASX) Market Announcements Office closes on the business day when the report is due, ASX does not suspend trading in the entity’s securities provided it lodges the report a reasonable time before market opens on the next trading day.
From 31 January 2023, if an entity lodges a periodic report after the ASX’s Market Announcements Office closes on the date when the report was due, but before it opens the next day, the listed entity will be suspended from trading on the next trading date.
ASX will not waive this rule.
ASX Reporting Calendar 2023
The 2023 reporting calendar for listed entities is now available on the home page of ASX Online and on the ASX website.
Designed as a quick reference guide for listed entities with a 30 June or 31 December balance date, it outlines key reporting dates under the Listing Rules. It also indicates days on which ASX is closed.
IASB Update – November 2022
The International Accounting Standards Board (IASB) met on 22-24 November when it:
- Discussed feedback from its Post-implementation Review of IFRS 9 Financial Instruments
- Decided to issue an exposure draft to introduce an accounting policy choice to permit the derecognition of a financial liability upon the initiation of an electronic payment transfer by a creditor.
- Considered feedback from its Discussion Paper on goodwill and impairment and tentatively decided to retain the impairment-only model for goodwill.
- Considered comments on its Exposure Draft Supplier Finance Arrangements and agreed to add disclosures relating to supplier finance arrangements to existing accounting standards.
IFRIC Update – November 2022
The IFRS Interpretations Committee (IFRIC) met on 29 November when it considered:
- How to assess whether a contract contains a lease under IFRS 16 Leases when the supplier has particular substitution rights.
- Potential topics for inclusion in an annual improvements project.
ISSB Update – November 2022
The International Sustainability Standards Board (ISSB) met on 15-16 November when it continued its deliberations on IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (draft S1) and IFRS S2 Climate-related Disclosures (draft S2).
The ISSB tentatively decided:
- To require disclosure of how climate-related risks and opportunities affect an entity’s strategy and decision-making, its plans to transition towards a lower-carbon economy, and its climate-related targets;
- That an entity report its sustainability-related financial disclosures at the same time as its related financial statements; and
- Provide short-term transitional relief.
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 not-for-profit (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
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 December 2022 and March 2023 to discuss the proposals.
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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.
