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.
Click on one of the Newsletter sections below:
| Top Story |
| Local Reporting |
| Regulations |
| International News |
| In Case You Missed It |
2024 Financial Reporting Update recording
The recording of our Financial Reporting Update webinar held on 23 May 2024, and relevant materials, are available on our website.
Our webinar explored:
- The key accounting standards and financial reporting changes for 30 June 2024;
- How recent changes will affect the classification of loans with annual review clauses, covenants, and other conditions;
- Legislative changes affecting companies, registered charities, and other For Purpose (Not-for-profit) entities;
- How companies will be affected by the sustainability and climate-related disclosure projects; and
- Developments in Australian and international financial reporting projects.
AASB considers climate-related disclosures
At its meeting on 14 May 2024, the Australian Accounting Standards Board (AASB) considered feedback on its Exposure Draft ED SR1 Australian Sustainability Reporting Standards (ASRS).
The Board briefly considered the possibility of issuing ASRS 1 as a voluntary Standard covering general requirements for the disclosure of sustainability-related financial information. However, ASRS 2 would still be a mandatory Standard covering climate-related financial information.
No decisions were made during the meeting. Feedback on ED SR1 will be further considered at future meetings.
The AASB has set an aspirational deadline to finalise its Australian Sustainability Reporting Standards on climate-related financial disclosures by the end of August this year, subject to the passage of the associated legislation through parliament.
AASB board meeting 6-7 June
The agenda and board papers are available for the AASB Board meeting to be held on 6-7 June 2024.
Topics to be discussed include:
- Development of the Tier 3 Not-for-profit reporting framework;
- Consideration of ballot draft of AASB 18 Presentation and Disclosure in Financial Statements;
- Continuation of the Climate-related Financial Disclosures project; and
- To decide on next steps and actions arising from the Post-implementation Review of AASB 1058.
AASB issues Exposure Draft on accounting for contracts for renewable electricity
The AASB issued ED 330 Contracts for Renewable Electricity.
Contracts for renewable electricity are often structured as power purchase agreements (PPAs), whether physical PPAs or virtual PPAs. These agreements often require the purchaser to pay for all generated electricity, regardless of immediate needs.
The Exposure Draft proposes changes to the financial instrument accounting for renewable electricity contracts with specified characteristics to:
- address how the ‘own-use’ requirements in AASB 9 Financial Instruments apply to such contracts;
- permit hedge accounting if these contracts are used as hedging instruments; and
- add disclosure requirements regarding the effects of these contracts on an entity’s financial performance and future cash flows.
The AASB’s proposed amendments are the same as those proposed by the IASB to IFRS Standards.
ED 330 is open for comment until 21 June 2024.
NSW Treasury releases guidance on accounting for contributions to bid costs
The NSW Treasury released a non-mandatory guide to assist NSW agencies determine how to account for bid cost contributions. Bid cost contributions are reimbursements paid to unsuccessful bidders for a portion of the costs they incur in preparing and submitting a tender for the delivery of property, plant and equipment on behalf of the State.
The guide assists agencies in determining whether these contributions: (a) qualify for capitalisation under AASB 116 Property, Plant and Equipment; (b) qualify for capitalisation under another accounting standard; or (c) should be expensed.
ASIC releases 30 June 2024 financial reporting focus areas
The Australian Securities and Investments Commission (ASIC) released its focus areas for 30 June 2024 financial reports.
ASIC has modified its approach and has identified enduring focus areas that apply to all reporting periods and supplementing these with particular areas of focus as new regulatory requirements or emerging issues arise. ASIC’s enduring areas of focus include asset values, adequacy of provisions, subsequent events and disclosures.
Particular focus areas and other matters for consideration in addition to the enduring focus areas include:
(a) Previously ‘grandfathered’ large proprietary companies - these companies are required to lodge financial reports for years ending on or after 10 August 2022. ASIC will now include this cohort in their surveillance program and follow up instances where non-compliance and non-lodgement occurs; and
(b) Superannuation trustees are required to lodge audited financial reports for most registrable superannuation entities (RSEs) with ASIC. Trustees will need to lodge within three months of the end of the fund’s 2023-24 financial year.
ACNC releases 2024-25 compliance and enforcement focus areas
The Australian Charities and Not-for-profits Commission (ACNC) has released its compliance and enforcement focus areas for 2024-25.
The ACNC’s enduring focus areas include:
- conduct that harms people, particularly children and vulnerable adults;
- misuse of a charity for terrorist purposes or to foster extremism, indirectly or directly;
- financial mismanagement including fraud and significant private benefit; and
- activities that put a charity at risk of having a disqualifying purpose so they are no longer eligible to be registered with the ACNC.
In addition, the ACNC identified the following emerging areas of focus:
- the use of complex structures that may be part of attempts to conceal non-compliance with the ACNC Act and Regulations; and
- issues relating to cyber security, the management of cyber risks, and the collection and storage of sensitive and personal information.
The ACNC also released Charity Chat podcast Episode 32 - Charities and Cyber Security. The podcast outlines the measures that charities can take to ensure adequate cyber security and minimise the chances of becoming a target.
AICD Not-for-Profit Governance Principles updated
The Australian Institute of Company Directors (AICD) published its 3rd edition of Not-for-Profit Governance Principles. This is an update of the 2019 2nd edition.
The Principles have been refined and consolidated into eight, with new principles on sustainability and organisational culture. The Principles also feature a governance checklist for smaller Not-for-profit entities.
Post-implementation review of IFRS 15 Revenue from Contracts with Customers
At its April 2024 meeting, the International Accounting Standards Board (IASB) reviewed stakeholder feedback on the post-implementation review of IFRS 15 and tentatively decided to take no further action on the matters related to:
- the accounting for price reductions;
- the accounting for liabilities arising from IFRS 15;
- other aspects of applying IFRS 15 with IFRS 9 Financial Instruments;
- the measurement of contract assets and contract liabilities acquired as part of a business combination; and
- other aspects of applying IFRS 15 with IFRS 3 Business Combinations.
The IASB tentatively decided to gather further evidence in the forthcoming post-implementation review of IFRS 16 Leases on the application matters related to assessing whether the transfer of an asset is a sale in a sale and leaseback transaction.
Post-implementation Review of IFRS 9 — Impairment
At its April 2024 meeting, the IASB tentatively decided to take no further action on matters relating to application of impairment requirements on purchased or originated credit-impaired financial assets; other requirements in IFRS 9 such as those relating to modification, derecognition or write-off of financial assets; and requirements in other IFRS Accounting Standards, including IFRS 15.
However, the Board will consider as low priority the matters relating to financial guarantee contracts on its next agenda consultation.
IASB Board meeting – April 2024
At its April 2024 meeting, the IASB also reached tentative decisions relating to:
- providing examples to illustrate how an entity applies IFRS standards to report the effects of climate-related and other uncertainties in its financial statements;
- accounting for rate regulated activities; and
- proposed improvements for IAS 37 Provisions, Contingent Liabilities and Contingent Assets, amongst others.
The IASB will continue to deliberate the above proposals at future meetings with a view to publishing exposure drafts later this year.
The related podcast can also be accessed via the IASB website.
IFRIC publishes two agenda decisions
The IFRS Interpretation Committee (IFRIC) published its final agenda decisions on the following matters:
- Climate-related commitments - relating to how IAS 37 Provisions, Contingent Liabilities and Contingent Assets applies to commitments made by entities to reduce or offset its future greenhouse gas (GHG) emissions. IFRIC observed a constructive obligation to reduce or offset GHG emissions of itself does not create a present obligation. Only when the entity has emitted GHG emissions can a present obligation arise. Furthermore, expenditure that creates another asset (such as property, plant, equipment, energy, product ingredients), which can be used to generate profits does not create an outflow of resources; and
- Payment contingent on continued employment during handover periods - about how an entity applies IFRS 3 Business Combinations to payments to the sellers of a business it has acquired if those payments are contingent on the sellers’ continued employment during a post-acquisition handover period.
IFRIC observed that, in the fact set described, the acquirer accounts for the payments as compensation for post-combination services rather than as additional consideration for the acquisition.
If an entity has applied a different accounting policy to that described in an IFRIC agenda decision, it is required to reflect a change in accounting policy in its financial statements.
IFRS 19 Subsidiaries without Public Accountability: Disclosures
The IASB has issued a new accounting standard, IFRS 19 Subsidiaries without Public Accountability: Disclosures. This standard is designed for subsidiaries of parent companies that already comply with full IFRS.
IFRS 19 simplifies the reporting process for these subsidiaries by allowing them to apply the full recognition and measurement requirements of IFRS while benefiting from reduced disclosure requirements.
IFRS 9 and IFRS 7 Amendments
The IASB issued the amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. The amendments relate to the classification and measurement of financial instruments under IFRS 9 relating to:
- derecognition of financial liabilities through electronic transfer;
- assessing contractual cash flow characteristics of financial assets, including those with environmental, social and governance (ESG)-linked features;
- financial assets with non-recourse features and contractually linked instruments.
These amendments will be effective to annual reporting periods beginning on or after 1 January 2026.
ISSB Knowledge Hub webcasts
The International Sustainability Standards Board (ISSB) launched a new webcast explaining the link between sustainability disclosures and financial statements. The webcast is divided into two parts:
Part 1: provides a general overview of the essential requirements for reporting sustainability information. It focuses on disclosing the financial impact of these factors in the current reporting period.
Part 2: explores the requirements for disclosing the financial effects of sustainability over different timeframes – short, medium, and long term. It acknowledges the need for judgment in these disclosures and highlights the ISSB Standards that provide guidance and support, including tools to adjust reporting based on company size or complexity.
New tax disclosures in financial reports
Listed and unlisted Australian public companies that report under Chapter 2M of the Corporations Act will be required to include a Consolidated Entity Disclosure Statement (CEDS) as part of their 2024 financial report.
The CEDS will disclose - for each entity that was part of the consolidated group at the end of the financial year - the entity name, entity type, country of incorporation, percentage of share capital held, and tax residency. A public company that has no subsidiaries or is not required to prepare consolidated financial statements is still required to include a CEDS.
The inclusion of a CEDS applies to relevant public companies for financial years commencing on or after 1 July 2023.
