There are some very important changes to AFSL financial reporting that are applicable now. These changes will be mandatory for the year ending 30 June 2022, however, there are very significant benefits to applying the changes for the year ending 30 June 2021.
We strongly recommend all our clients (in fact all AFSL holders) should make use of the exemptions and practical expedients that are only possible by adopting these changes for the year ending 30 June 2021.
In summary, these changes mean that holders of an Australian Financial Services Licence are no longer free to prepare a special purpose financial report, but will instead have to prepare and lodge with ASIC a general purpose financial statement.
The following two new accounting standards have an impact on the financial statements that AFSLs are required to prepare and lodge with ASIC (regardless of their size or legal structure):
AASB 2020-2 removes the ability of for-profit entities with reporting requirements requiring compliance with Australian Accounting Standards (AAS) to prepare Special Purpose Financial Statements (SPFS).
AASB 1060 provides simplified disclosure requirements for all for-profit entities who are no longer able to prepare SPFS. This allows for the preparation of Simplified Disclosure Statements (SDS) which are more detailed than SPFS but not as involved as full General Purpose Financial Statements (GPFS).
If you have already been applying full recognition and measurement principles in the preparation of your financial statements, then this change should only result in a small amount of additional disclosure.
However, if you have been using a different basis, for example preparing financial statements on a tax basis of accounting, or if you have not yet adopted the requirements of AASB 15 and AASB 16, you may have more work to do in implementing this transition. Some of the requirements that will now be applicable as part of preparing your AFSL financial statements include:
consolidation of subsidiaries
Application of AASB 15 Contracts with Customers (recording revenue based on the completion of performance obligations)
Application of AASB 16 Leases (removes the distinction between operating and finance leases, and records lease assets and liabilities on the balance sheet)
Tax effect accounting (recording deferred tax assets and liabilities on the balance sheet)
While this standard is mandatory to apply for the year ending 30 June 2022, if you wait until then, on first time adoption the comparatives for 30 June 2021 will also have to be “restated” to conform with the standard. Whereas if you adopt the standard for the year ending 30 June 2021 you can make all the changes in the 2021 year and are not required to restate the previous year figures. It is for this reason we are encouraging our AFSL clients to early adopt AASB 1060 and prepare the financial report for the year ending 30 June 2021 in the General Purpose – Simplified Disclosures format.
Need Help?
If you need assistance in preparing and formatting a SDS financial statement, there is a very good template available for free download from Accurri. You should discuss with your accountant now, or else please get in touch with our office and we can discuss various options, including completing the compilation for you by our non-audit team as a separate service.
Planning to do nothing?
In case you decide to wait, and only want to apply the new standard from 1 July 2021 (for the year ending 30 June 2022) please be aware that the comparatives (figures for 30 June 2021) may be required to be re-stated at that time, and may require additional audit work, depending on the significance of the restatements.
Please get in touch with us if you would like to discuss this further or if you seek further clarity on the matter.