Welcome to the first edition of Beyond The Numbers for 2023, our monthly newsletter which brings you a summary of the latest developments from local and international standard setters and regulators.
AASB Amends Classification of Non-Current Debt With Covenants
The Australian Accounting Standards Board (AASB) has amended AASB 101 Presentation of Financial Statements to clarify that only conditions (covenants) with which an entity is required to comply on or before the reporting date affects the classification of a loan liability as current or non-current. Covenants that an entity has to comply with after balance date does not affect the classification of the liability.
New disclosures regarding the conditions that could cause those loans to become repayable within twelve months after balance date have also been added.
The amendments are expected to result in more bank loans and borrowings being classified as non-current liabilities.
The amendments apply from 1 January 2024 but can be applied earlier.
AASB Board Meeting – February 2023
The AASB met on 1 February 2023 and made key decisions in relation to Climate-related Financial Disclosures and a Draft Sustainability Reporting Standard-Setting Framework, including to:
- address climate as the first sustainability reporting topic;
- use the work of the International Sustainability Standards Board (ISSB) as a foundation, with modifications for Australian matters and requirements; and
- focus initially on the development of reporting requirements for sustainability-related financial information.
The initial scope of the AASB’s project will focus on the for-profit sector, with not-for-profit sectors being considered at a later stage.
AASB Modifies Fair Value Measurement for Not-for-Profit Public Sector Entities
The AASB issued AASB 2022-10 Amendments to Australian Accounting Standards – Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities addressing the fair value measurement of non-financial assets of not-for-profit public sector entities not held primarily for their ability to generate net cash inflows.
The amendments apply from 1 January 2024, with earlier application permitted.
Insurance Activities in the Public Sector
The AASB deferred the mandatory application date of AASB 17 Insurance Contracts for public sector entities until annual periods beginning on or after 1 July 2026 (instead of 1 July 2025) and made public-sector-specific modifications to AASB 17. The amendments are contained in AASB 2022-8 and AASB 2022-9.
Public sector entities continue to apply AASB 4 Insurance Contracts and AASB 1023 General Insurance Contracts to annual periods beginning on or after 1 January 2023 but before 1 July 2026.
AASB Repeals Redundant Accounting Standards
The AASB issued Accounting Standard AASB 2022-7 Editorial Corrections to Australian Accounting Standards and Repeal of Superseded and Redundant Standards.
The repeal of superseded principal Standards and of redundant amending Standards does not change the application of any Standards or requirements. The repealed Standards cease to be classified as in-force legislative instruments on the Federal Register of Legislation. There is no change to the availability of the repealed Standards on the AASB website.
Service Performance Reporting
The AASB has reactivated its project on service performance reporting for not-for-profit entities. The Board will consider:
- the extent to which financial and non-financial information should be capable of assurance;
- the timeframe for adoption if a mandatory pronouncement is to be developed.
A draft project plan will be considered later in 2023.
Treasury Consults on Climate-related Financial Disclosure
On 12 December 2022 Treasury issued a Climate-related Financial Disclosure Consultation Paper seeking views on the design and implementation of requirements for disclosure of climate-related financial risks. The consultation seeks views on matters including the:
- Size and type of entities required to report climate-related information;
- Nature and extent of climate-related reporting;
- Level of assurance required for climate disclosures; and
- Timing of when such reporting should commence.
Submissions to Treasury close on 17 February 2023. Nexia Australia will provide limited feedback to Treasury on the proposals.
Remaking of ACNC Regulations
The Australian Charities and Not-for-profits Commission Regulations 2013 automatically sunset on 1 April 2023. As a result, Treasury has remade the regulations as the Australian Charities and Not-for-profits Commission Regulations 2022, which are effective from 1 April 2023. There are minimal changes to the substantive requirements of the 2013 Regulations.
The relevant ACNC Regulations apply as follows:
- Financial reports for the 31 December 2022 financial year that are signed before 1 April 2023 still refer to the 2013 Regulations;
- Financial reports for the 31 December 2022 financial year that are signed on or after 1 April 2023 will refer to the 2022 Regulations; and
- Financial reports for the 2022-23 financial year will refer to the 2022 Regulations.
ASX Late Lodgement Rules
Previously, if an entity failed to lodge a periodic report before the Australian Securities Exchange’s (ASX) Market Announcements Office closed on the business day when the report was due, ASX did not suspend trading in the entity’s securities provided it lodged the report a reasonable time before market opens on the next trading day.
From 31 January 2023, if an entity lodges a periodic report after the ASX’s Market Announcements Office closes on the date when the report was due, but before it opens the next day, the listed entity will be suspended from trading on the next trading date.
ASX will not waive this rule.
International Accounting Standards Board (IASB) Update – January 2023
The IASB met on 24 – 26 January 2023 when it continued discussion on the following topics:
- Clarifications to the equity method of accounting;
- Simplifying the application of the impairment test for goodwill and clarifying other aspects of the disclosure requirements for business combinations;
- Classification and disaggregation requirements of Primary Financial Statements; and
- Disclosure Initiative—Subsidiaries without Public Accountability.
International Sustainability Standards Board (ISSB) Update – January 2023
The ISSB met on 17 – 19 January 2023 to redeliberate some of the proposals in its exposure drafts IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (draft IFRS S1) and IFRS S2 Climate-related Disclosures (draft IFRS S2).
The ISSB will continue to redeliberate the proposals with the aim of making final decisions about the content, including the effective date for draft IFRS S1 and draft IFRS S2, and beginning the process of approving the Standards.
AASB Issues Post-implementation Review of Income Recognition of Not-for-profit Entities
The AASB is seeking feedback from not-for-profit stakeholders on implementation problems arising from the application of AASB 1058 Income of Not-for-profit Entities and AASB 15 Revenue from Contracts with Customers.
The AASB is seeking stakeholder feedback on the following areas:
- Sufficiently specific criterion and the legal interpretation of agreements;
- Capital grants;
- Difference between management accounts and statutory accounts and alternative revenue recognition models;
- Principal v agent, including the appropriate recognition of financial liabilities;
- Grants received in arrears;
- Termination for convenience clauses in grant agreements;
- Accounting for research grants; and
- Statutory receivables.
Comments to the AASB close on 31 March 2023.
Post-implementation Review of Not-for-Profit Topics – Control, Structured Entities, Related Party Disclosures and Basis of Preparation of Special Purpose Financial Statements
The AASB is seeking feedback from not-for-profit (NFP) stakeholders on implementation problems arising from the following areas:
- Control and consolidation for NFP entities;
- The definition of a structured entity for NFP entities;
- Related party disclosures by NFP public sector entities; and
- Basis of preparation of special purpose financial statements.
Comments to the AASB close on 31 March 2023.
Tier 3 Simplified Accounting for Not-for-Profit Private Sector Entities
The AASB’s Discussion Paper addresses a proposed Tier 3 general purpose financial reporting framework for not-for-profit (NFP) entities.
The Discussion Paper proposes a number of simplified measurement and recognition requirements as an alternative to IFRS measurement and recognition, and reduced disclosures compared to Tier 2 general purpose financial statements.
Comments to the AASB close on 31 March 2023.
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If you would like to discuss further any of the information provided in these updates and how it may impact you, please contact your Nexia Edwards Marshall NT Advisor.
