ASIC and ACNC provide direction on EOFY reporting
The Australian Securities and Investments Commission (ASIC) and Australian Charity and Not-for-profits Commission (ACNC) have released some information to ensure boards and management are on top of their reporting requirements as we head towards 30 June 2018.
ASIC has announced its focus areas for 30 June 2018 financial reports of listed entities and other entities of public interest. These areas include:
New accounting standards
ASIC notes that the introduction of major new accounting standards will have the greatest impact on financial reporting for many companies since the adoption of International Financial Reporting Standards in 2005.
Full-year reports at 30 June 2018 must disclose the future impact of these new accounting standards. Half-year financial reports at 30 June 2018 must comply with the new requirements for revenue recognition and financial instrument valuation.
The new standards cover revenue recognition; financial instrument valuation (including hedge accounting and loan loss provisioning); lease accounting; accounting by insurers; and the definition and recognition criteria for assets, liabilities, income and expenses.
New accounting standards that will significantly affect reported results of many companies include:
- AASB 9 Financial Instruments (applies from years commencing 1 January 2018)
- AASB 15 Revenue from Contracts with Customers (applies from years commencing 1 January 2018)
- AASB 16 Leases (applies from years commencing 1 January 2019)
- AASB 17 Insurance Contracts (applies from years commencing 1 January 2021)
- Amendments to standards to apply the new definition and recognition criteria in the Conceptual Framework for Financial Reporting (applies from years commencing 1 January 2020)
These new accounting standards may significantly affect how and when revenue can be recognised, the values of financial instruments (including loan provisioning and hedge accounting), reported assets and liabilities relating to leases, accounting by insurance companies, and the general identification and recognition of assets, liabilities, income and expenses. The standards also introduce new disclosure requirements.
However, ASIC Commissioner John Price is concerned that some companies may not have adequately prepared for the impact of new accounting standards that can significantly affect the results they report to the market. ‘So far, surprisingly few companies have made disclosures of the impact of these standards,’ he says.
Operating and financial review
Listed companies should disclose information on risks and other matters that may have a material impact on the future financial position or performance of the entity. This could include, for example, matters relating to digital disruption, new technologies, climate change, Brexit or cyber-security. For more information see ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247).
Directors may also consider whether it would be worthwhile to disclose additional information that would be relevant under integrated reporting, sustainability reporting or the recommendations of the Task Force on Climate-related Financial Disclosures where that information is not already required for the operating and financial review.
ASIC’s surveillance continues to focus on material disclosures of information useful to investors and others using financial reports, such as assumptions supporting accounting estimates and significant accounting policy choices.
ASIC will not pursue immaterial disclosures that may add unnecessary clutter to financial reports. However, it says efforts should be made to communicate information more clearly in financial reports.
ASIC continues to review the financial reports of proprietary companies and unlisted public companies, based on complaints and other intelligence. ASIC wrote to more than 1,000 proprietary companies that appeared to be large with no reporting exemption and had not lodged financial reports. It will be writing to several hundred more companies later this year.
Australian Charity and Not-for-profits Commission
In a bid to cut red tape and avoid duplicated reporting, the ACNC’s transitional reporting arrangements allow the ACNC to accept reporting originally prepared for other agencies. These arrangements have now been extended to include the 2017-18 and 2018-19 financial years.
The following list reveals if your charity can take up any of these transitional arrangements:
Office of the Registrar of Indigenous Corporations (ORIC)
The ACNC and ORIC work in partnership. Indigenous organisations that are registered with ORIC, and report to ORIC, do not have to report separately to the ACNC. The information organisations provide to ORIC is passed on to the ACNC. This allows the ACNC to update details on its register.
Department of Education and Training (DET)
If your non-government school submits a financial questionnaire to the DET, you do not have to provide financial information to the ACNC directly for reporting periods between 2014 and 2019.
The ACNC will accept the financial information lodged with DET (including the financial report collected by DET in the 2016 and 2017 reporting periods) as meeting its requirements under the ACNC Act to fulfil the financial reporting obligation in the annual information statement.
For reporting periods 2018 and later, the ACNC will continue to work with non-government schools to streamline financial reporting requirements.
Australian Taxation Office (ATO)
Prior to the 2016 reporting period, charities that were ancillary funds were required to submit both an ancillary fund return to the ATO and an Annual Information Statement to the ACNC.
Since the 2016 reporting period, most of these funds have only been required to submit the annual information statement to the ACNC.
The ATO will contact funds that still need to submit an ancillary fund return to the ATO.
Reporting to state or territory regulators
Your medium or large charity may currently submit financial reports to the state or territory regulator because it is an incorporated association a cooperative, or a charitable fundraising organisation.
If so, you may be able submit the same financial report to the ACNC. For some, the ACNC will accept this financial report as meeting its requirements for the 2014 to 2019 reporting periods.
Charities that report to ASIC
Charities incorporated as companies by or registered with ASIC have many of their notification and reporting obligations to ASIC replaced by obligations to the ACNC. This is not a transitional arrangement. Click here for more information.