The Australian Securities and Investments Commission (ASIC) has released its finalised financial reporting requirements for Australian financial services (AFS) licensees following accounting standard changes.
The new requirements require AFS licensees' financial reports to contain disclosures consistent with the financial reports of other for-profit entities, prepared under the Australian Accounting Standards Board's (AASB) standards.
Specifically, from financial years commencing July 1, 2021, for-profit companies, registered schemes, and disclosing entities preparing financial reports under Chapter 2M of the Corporations Act 2001 (the Act) – and which are not reporting entities – can no longer prepare special purpose financial reports (SPFRs) that do not contain all disclosures required in the full accounting standards.
All entities must apply the requirements for assets, liabilities, income, and expenses. Meanwhile, entities without public accountability can use a simplified disclosure regime. On the other hand, entities with public accountability must comply with the full standards' disclosure requirements. Entities have public accountability if:
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AASB's new reporting regime will apply to the Chapter 7 financial reports of most AFS licensees, using the public accountability test. Meanwhile, some licensees must apply the full standards' disclosure requirements to avoid doubt about whether they have public accountability or because they are large or sophisticated licensees with a more significant market impact. These licensees are:
Commenting on the changes, ASIC Commissioner Sean Hughes said: “These reporting changes will assist those who prepare financial reports under both sets of requirements and provide relevant information for ASIC's surveillance of licensees and for other users of financial reports.”
The changes in financial reporting requirements follow ASIC's revision of the class order product disclosure statement (PDS) requirements for quotes provided for a general insurance product.