• News
  • 5 February 2024

Greetings and welcome to the inaugural issue of Beyond the Numbers for 2024. This monthly newsletter is designed to provide you with a concise overview of the most recent updates 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

Draft legislation for climate-related disclosures issued

Nexia has issued its publication on the Treasury’s Climate-related financial disclosure: exposure draft legislation.

The draft legislation introduces mandated climate-related financial disclosures for all entities required to report under Chapter 2M of the Corporations Act, phased in over three years commencing 1 July 2024 based on the entity’s size.

The climate-related disclosures will be included in a separate sustainability report forming part of an entity’s annual report and will incorporate the proposed Australian Sustainability Reporting Standard SR1 Disclosure of Climate-related Financial Information.

Furthermore, the draft legislation imposes assurance requirements on the entity’s sustainability report. Treasury’s Exposure Draft is open for comment until 9 February 2024 and can be accessed here.

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AASB ED 327 Financial Instruments with Characteristics of Equity

The Exposure Draft aims to amend AASB 132 Financial Instruments – Presentation, AASB 7 Financial InstrumentsDisclosures and AASB 101 Presentation of Financial Statements.

The proposed changes aim to offer clearer guidelines on classifying financial instruments, aiding entities in distinguishing between financial liabilities and equity.

Additionally, there will be enhanced disclosures to explain intricacies related to instruments exhibiting both financial liability and equity characteristics.

Finally, the proposal includes presentation requirements, emphasising the separation of amounts, such as profit and total comprehensive income, attributable to ordinary shareholders from those attributable to other equity instrument holders.

The AASB is seeking comments on the proposals by 9 February 2024.

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AASB-AUASB Research Report

The Australian Accounting Standards Board (AASB) and Auditing and Assurance Standards Board (AUASB) released their joint research report on the evolving landscape of climate-related disclosures and assurance within the 2022 annual reports of ASX-listed entities.

Key findings of the research report include:

  • Increasing disclosure: Australian listed entities are reporting climate-related information more frequently, with a jump from 36.1% in 2021 to 42.8% in 2022.
     
  • Focus areas: The most common areas for disclosures include the carrying value and impairment of non-financial assets, risk management, property, plant and equipment, and subsequent events.
     
  • Gaps remain: Despite the increase, many companies may still need significant work to meet the requirements of IFRS S2 on climate-related disclosures.

Overall, the report indicates a positive trend towards greater transparency about climate-related risks and opportunities among Australian listed entities. However, it also emphasises the need for continued improvement and alignment with international standards to ensure comprehensive and accurate reporting.

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Chartered Accountants Australia and New Zealand (CA ANZ) | Essential reporting guides for December 2023

The CA ANZ has released its biannual Reporting Essentials Guides for December 2023, providing timely and comprehensive support for financial statement preparers, management/directors, and auditors in both Australia and New Zealand.

These guides offer insights into the latest accounting standards, regulatory developments, and emerging trends impacting financial reporting. Key areas covered include: new and amended accounting standards, legislative developments, and emerging topics and challenges such as sustainability reporting, digital reporting, and auditing in uncertain times.

The guides can be accessed by CA ANZ members.

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ASIC Focus Areas – 31 December 2023

Key findings from ASIC’s first integrated financial reporting and audit surveillance report form the basis for identifying areas for particular consideration. Here's what directors, preparers, and auditors need to focus on:

  • Impairment, asset values and provisions: Assess the impact of economic conditions on the value of assets and the need for provisions.
     
  • Post-year-end events: Disclose any significant events occurring after the financial year-end and before completing the financial report that could affect the reported results.
     
  • Financial report and OFR: Ensure clear and informative disclosures about uncertainties, assumptions, and risks, especially in the Operating and Financial Review (OFR).
     
  • The impact of a new accounting standard for insurers.

For further details on ASIC's focus areas and reporting requirements, visit the ASIC website.

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ASIC releases guidance on the registration of financial advisers

Effective 1 February 2024, a new era of transparency dawns for financial advice in Australia. ASIC mandates registration for financial advisers providing personal advice to retail clients on specified financial products.

Provisional advisors are exempt, but for everyone else, ASIC Information Sheets 276 and 277 provide comprehensive guidance on the registration process, including eligibility, application procedures, and ongoing obligations.

AFS licensees are responsible for registering their relevant providers with ASIC by 1 February 2024. Unregistered advisers operating after 1 February will be in breach of the law and face potential regulatory action.

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Reminder | Changes to self-assessment of tax exemption for not-for-profits

The ATO has issued a reminder that effective 1 July 2023, all non-charity not-for-profit entities holding an active ABN and claiming income tax exemption must annually self-declare their exempt status to the Australian Taxation Office (ATO). This requirement begins with the 2024 financial year return, due between 1 July and 31 October 2024.

Subsequent years will see pre-populated self-review returns, simplifying the process of confirming or updating information. Failure to comply could result in tax assessments and penalties.

The ATO underscores the importance of thorough assessments before claiming tax exemptions. Presuming exempt status without detailed analysis is not recommended, as the new reporting regime aims to ensure proper application of tax laws.

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Major change for tax practitioners: Restrictions on disqualified entities

The Australian Government recently introduced changes to the provision of tax agents’ services through the Treasury Laws Amendment (2023 Measures No. 1) Act 2023. The amendments include restricting the involvement of "disqualified entities" in tax practitioner services.

Key points include:

Disqualified entities: Individuals or entities (non-tax practitioners) who have committed serious offences or breached the Tax Agent Services Act 2009 (TASA) within the past five years.

Restrictions: Tax practitioners are prohibited from employing, engaging, or using the services of a disqualified entity to provide tax agent services on their behalf unless approved by the Tax Practitioners Board.

Notification: Disqualified entities are obligated to inform their employer/the tax practitioner in writing within 30 days of their status change.

The related explanatory memorandum discussing further details can be found here.

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ACNC reminder

ACNC issued some housekeeping reminders as the new year kicks off.

First on the list is knowing your reporting deadlines, including due dates for the Annual Information Statement. Next is to ensure that the charity’s address and contact details are up to date. Also, ensure that Responsible People have access to the Charity Portal.

Finally, review your governing document: has anything changed? If so, submit any updates using the ACNC Charity Portal.

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Fixed term contracts: New rules for employers in Australia

From 6 December 2023, Australian employers face new regulations regarding fixed term contracts (FTCs).

Subject to some exceptions, employers can no longer keep rolling over fixed term contracts for the same role indefinitely. If an entity had two consecutive fixed term contracts for the same job, the third one becomes permanent unless there's a genuine reason (e.g. a temporary project). Employees must be given a Fixed Term Contract Information Statement (FTCIS) published by the Fair Work Ombudsman outlining the worker’s rights when they start work.

Finally, employers shall not force an employee into a fixed term contract or pressure an employee to give up permanency rights.

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International Accounting Standards Board (IASB) update – January 2024

In January 2024, the IASB considered various agenda items.

The key matters discussed include:

  • Post-implementation review (PIR) of IFRS 15 Revenue from Contracts with Customers.

    The IASB intends to delve deeper into three topics that received the most feedback: identification of performance obligations, principal versus agent considerations, and licensing.
     
  • Amendments to the Classification and Measurement of Financial Instruments.

The IASB considered feedback on the exposure draft proposing amendments to IFRS 9 and IFRS 7 and discussed its proposals relating to the general requirements for assessing the contractual cash flow characteristics of a financial asset and requirements for classifying and measuring financial assets with non-recourse features and contractually linked instruments.

Read More >>

 

IFRS Sustainability Knowledge Hub

The IFRS Foundation has launched the IFRS Sustainability Knowledge Hub, which is aimed at facilitating the application of ISSB Standards.

This hub provides valuable resources such as an overview of the ISSB Standards, a transitional guide from the Task Force on Climate-related Financial Disclosures (TCFD), recommendations to ISSB Standards, and a collection of Frequently Asked Questions (FAQs).

Apart from the knowledge hub, the ISSB also released new educational material to help companies consider the ‘nature and social aspects’ of climate-related risks and opportunities when applying IFRS S2.

Read More >>

 

IFRIC update November 2023

The Committee published two tentative agenda decisions dealing with the following:

  • Climate-related Commitments (IAS 37 Provisions, Contingent Liabilities and Contingent Assets).

    The Committee considered whether an entity’s commitment to reduce or offset its greenhouse gas emissions creates a constructive obligation for the entity and whether a constructive obligation created by such a commitment meets the criteria in IAS 37 for recognising a provision.

    The Committee observed that:

    a. The recognition of a constructive obligation arising from an entity's commitment to reduce and offset greenhouse gas emissions depends on the specific facts and details of the commitment and the circumstances surrounding it.

    b. Only obligations arising from past events existing independently of the entity’s future actions are provisions. Hence, commitments that result in a constructive obligation are recognised as a provision only when it has taken the action to which its published policy or statement applies. Costs that need to be incurred to operate in the future are not recognised as liabilities.
     
  • Disclosure of Revenues and Expenses for Reportable Segments (IFRS 8 Operating Segments).

    The Committee considered the requirement in IFRS 8 to disclose specified amounts included in segment profit or loss and how an entity determines ‘material items’ of income and expense.

    The Committee observed that an entity applies IAS 1 and considers both qualitative and quantitative factors in assessing whether an item of income and expense is material.

The Committee also published its final agenda decision dealing with a Merger between a Parent and Its Subsidiary in Separate Financial Statements.

The Committee observed that parent entities generally do not apply the acquisition method in IFRS 3 to such merger transactions and decided not to add a standard-setting project to its work plan.

Read More >>


AASB issues exposure draft on Climate-related Financial Disclosures

Nexia has issued its publication on the AASB’s Exposure Draft ED SR1 Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information.

The ED SR1 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).

ED SR1 is open for comment until 1 March 2024 and can be viewed here.

Read More >>


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