Australian Financial Services (AFS) licensees that are companies, registered schemes or disclosing entities can no longer prepare special purpose financial reports (SPFRs) to meet their AFSL reporting obligations from 1 July 2021. However, some licensees will be able to defer this requirement for 12 months.
Deferral will be possible for those AFS licensees that prepared SPFRs last year and do not otherwise prepare financial reports under Chapter 2M of the Corporations Act 2001 (the Act). These entities can choose to defer the new requirement to prepare general purpose financial statements to financial years commencing on or after 1 July 2022.
What to do in place of special purpose financial statements
All AFS licensees that are companies, registered schemes or disclosing entities will need to submit general purpose financial statements to meet their AFS licensee obligations under Chapter 7 of the Act. General purpose financial statements require the recognition and measurement requirements of all accounting standards to be followed, and this includes consolidation and equity accounting where relevant (in addition to single entity financial statements).
Under the Australian Accounting Standards Board’s reporting regime, in order to determine what type of disclosures are included in general purpose financial statements, the AASB 1053 Application of Tiers of Australian Accounting Standards public accountability test is used. Tier 1 (full disclosures) is required for those entities that have public accountability and Tier 2 (simplified disclosures) can be used by those entities that do not have public accountability. This distinction will also be used for the financial reports for most AFS licensees.
However, in addition to the above, in the media release dated 3 June 2022, ASIC has included a list of those licensee types that are required to adopt the full disclosures (ie Tier 1), irrespective of whether they satisfy the AASB 1053 public accountability test. For a full list of these type of licensees refer to the media release linked below.
Other transitional requirements
An exemption from the requirement to include new disclosures in the comparative information of the first financial report prepared under the new arrangements is available, if the entity is not required to prepare annual financial reports under Chapter 2M of the Act.
Further, some relief also exists for entities that do not have public accountability that prepared SPFS in the prior year and are required to prepare annual financial reports under Chapter 2M of the Act, if they hold a license of the type listed by ASIC in the media release. These entities can defer application of full disclosures (ie Tier 1) for 12 months and can apply the comparative relief for new disclosures when adopting Tier 1 in their annual financial reports. If these choose to defer, they will need to adopt simplified disclosures (ie Tier 2) in their annual financial reports for the year commencing on or after 1 July 2021.
More information
More information can be found in 22-128 MR ASIC announces financial reporting changes for AFS licensees dated 3 June 2022 and the updated prescribed ASIC Form FS 70 which will be available late June 2022.
