Update on financial reporting requirements for Australian Financial Services Licensees

Impact of the Australian Accounting Standards Board’s financial reporting reforms for for-profit entities

for years ending 30 June 2022 and beyond

Introduction

This fact sheet has been prepared by Chartered Accountants Australia and New Zealand (CA ANZ) and CPA Australia to assist members understand how the statutory

Impacted AFSLs include entities regulated by the Australian Prudential Regulation Authority (APRA) but do not include self-managed superannuation funds (SMSFs). In

addition, this fact sheet does not consider AFSLs that are foreign companies as they are subject to different statutory reporting requirements.

The fact sheet uses flowcharts to assist members identify the key decision points involved in implementing the financial reporting reforms and the implications of those

decisions. However, readers should not rely on this fact sheet alone but refer to the relevant legal requirements in the Act and Australian Accounting Standards (AAS) as the

final determinants of an AFSL’s statutory reporting obligations.

This fact sheet assumes knowledge of the AASB’s financial reporting reforms and more details surrounding these reforms can be found in our joint publication Can I still

prepare special purpose financial statements? It also assumes an understanding of the statutory financial reporting requirements applicable to AFSLs and, in addition to its

• SAC 1 Definition of the Reporting Entity (SAC 1), as amended by AASB 2020-2 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector

Entities (limiting the scope of SAC 1 for some for-profit entities)

• AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (introducing the Simplified Disclosure Regime

(SDS) replacing the Reduced Disclosure Regime (RDR) set out in AASB 1053 Application of Tiers of Australian Accounting Standards)

As noted above, these changes affect AFSL’s reporting under Chapter 2M of the Act due to their requirement to comply with AAS in section 296, and Chapter 7 of the Act due

to their requirements to lodge financial reports prepared in accordance with AAS as required by Form FS70, which has the force of law (see “financial statements” on page 7,

Guide to Form FS70). Depending on its legal structure an AFSL reports either under Chapter 7 (generally, AFSLs that are not companies) or under both Chapter 2M and 7

(generally, AFSLs that are companies).

Update on financial reporting requirements for Australian Financial Services Licensees

Impact of the Australian Accounting Standards Board’s financial reporting reforms for for-profit entities

for years ending 30 June 2022 and beyond

Application of the AASB financial reporting reforms to AFSLs

AASB 1053 Appendix A and B defines an entity as having “public accountability” where:

• its debt or equity instruments are traded in a public market, or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock

exchange or an over-the-counter market, including local and regional markets); or

• it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses (this would include AFSLs that hold client monies).

In addition to this definition, ASIC has also deemed certain AFSL licence categories as always having “public accountability” for the purposes of complying with their statutory

financial reporting obligations (see section 11 of Form FS70). ASIC has taken this approach in order to avoid doubt about the status of particular AFSLs, and/or to recognise

the significance of certain AFSLs to their markets. AFSLs that are deemed to have “public accountability” must prepare and lodge Tier 1 GPFS (see paragraph 11(a) of Form

FS70 and also ASIC media release (22-128MR) while all other AFSLs that are not deemed to have “public accountability” must, as a minimum, prepare and lodge Tier 2

• wholesale electricity dealers

• corporate advisors that deal in financial products

• over-the-counter derivative traders

• wholesale trustees

• responsible entities of a registered scheme

• corporate directors of a corporate collective investment vehicle

• providers of a custodial or depository service

• operators of an investor directed portfolio service.

Transitional provisions

Update on financial reporting requirements for Australian Financial Services Licensees

Impact of the Australian Accounting Standards Board’s financial reporting reforms for for-profit entities

for years ending 30 June 2022 and beyond

Australian Accounting Standards (AASB 1057)) and prepared a SPFS in the immediately preceding financial year. For more details see the flowcharts below, Form FS70 and

Consequences of utilising ASIC transitional provisions around comparatives

The transitional relief offered by ASIC is not provided by AAS and therefore financial statements prepared under the requirements of Chapter 2M that make use of ASIC’s

transitional relief cannot state that they “comply with Australian Accounting Standards” because AAS require comparative information for all amounts reported in the current

period financial statements (see paragraph 38 of AASB 101 Presentation of Financial Statements). However, the transitional relief is available to financial reports prepared

under the requirements arising from Chapter 7 of the Act since this relief is contained in FS70. Accordingly, ASIC has engaged with the AASB and the Australian Auditing and

Assurance Standards Board (AUASB) and has included in its FAQs, guidance on what should be included in the “basis of preparation” note to the financial statements and the

auditor’s report in these circumstances.

statements.

Natural persons

Where a natural person is an AFSL, the financial reports covering the licensee’s activities must be prepared as Tier 1 or Tier 2 GPFS. However, the financial reports do not

need to include revenue and expenses that relate to the licensee’s personal activities, or their non AFSL business interests, provided this exclusion is noted in the financial

reports (see Form FS70, certification paragraph 11B).

Self-managed superannuation funds (SMSFs)

Update on financial reporting requirements for Australian Financial Services Licensees

Impact of the Australian Accounting Standards Board’s financial reporting reforms for for-profit entities

for years ending 30 June 2022 and beyond

(Including small proprietary companies and natural persons)

transition to Tier 2 GPFS (applying AASB 1060) by 30 June

2023 (extra 1 year transition window). ASIC transitional

provisions provide relief from comparatives for any new

disclosures in those initial Tier 1

GPFS (see FS70)

assess to not be a “reporting entity” (as per AASB 1057 and SAC 1) for the year ended

• regulated by the Australian Prudential Regulatory Authority

• participants in a licensed market

• wholesale trustees

by 30 June 2023. ASIC’s transitional

Update on financial reporting requirements for Australian Financial Services Licensees

Impact of the Australian Accounting Standards Board’s financial reporting reforms for for-profit entities

for years ending 30 June 2022 and beyond

June 2022 and beyond

Update on financial reporting requirements for Australian Financial Services Licensees

Impact of the Australian Accounting Standards Board’s financial reporting reforms for for-profit entities

for years ending 30 June 2022 and beyond

CA ANZ and CPAA in Australia only. It is not intended for use by any person who is not a CA ANZ or CPAA member and/or does not have appropriate expertise in the factsheet's subject matter. The fact sheet is intended to

No warranty is given as to the correctness of the information contained in this fact sheet, or of their suitability for use by you. To the fullest extent permitted by law, CA ANZ and CPAA are not liable for any statement or opinion,

or for any error or omission contained in these FAQs and disclaim all warranties with regard to the information contained in it, including, without limitation, all implied warranties of merchantability and fitness for a particular

purpose. CA ANZ and CPAA are not liable for any direct, indirect, special or consequential losses or damages of any kind, or loss of profit, loss or corruption of data, business interruption or indirect costs, arising out of or in

connection with the use of this publication or the information contained in it, whether such loss or damage arises in contract, negligence, tort, under statute, or otherwise.

Copyright Notice

© 2022 Chartered Accountants Australia and New Zealand and CPA Australia

Copyright Use Statement

This fact sheet is protected by copyright. Other than for the purposes of and in accordance with the Copyright Act 1968 (Cth), this fact sheet may only be reproduced for internal business purposes, and may not otherwise be