Welcome to Beyond The Numbers, our monthly newsletter which brings you a summary of the latest developments from local and international standard setters and regulators.
Click on one of the Newsletter sections below:
The International Accounting Standards Board (IASB) released its Exposure Draft (ED) Business Combinations—Disclosures, Goodwill and Impairment.
The ED proposes amendments to improve the information companies disclose about the performance of business combinations and to amend the impairment test of cash-generating units containing goodwill.
- Enhanced disclosures: Companies will be required to report the objectives and related performance targets of their most important acquisitions, including whether these are met in subsequent years. Companies would also be required to provide information about the expected synergies for all material acquisitions.
- Targeted changes to goodwill impairment test: Removing the restriction on including cash flows from uncommitted future restructuring or asset enhancement; and removing the requirement to calculate value in use on a pre‑tax basis.
The IASB decided against reintroducing an amortisation model for goodwill.
A short video detailing the proposed changes can be found here. Submissions on the ED close on 15 July 2024.
AASB 2024-1 Supplier Finance Arrangements: Tier 2 Disclosures
The AASB has issued Accounting Standard AASB 2024-1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements: Tier 2 Disclosures.
That Standard amends AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities to require a Tier 2 entity to disclose information about its supplier finance arrangements. Tier 2 entities will be required to disclose the terms and conditions of supplier finance arrangements; the carrying amount of the liabilities that are part of the arrangements; the carrying amounts of those liabilities for which the suppliers have already received payment from the finance providers; the range of payment due dates; and the effect of non-cash changes.
AASB 2024-1 applies to annual periods beginning on or after 1 January 2024 that end on or after 30 June 2024, with earlier
application permitted.
Not-for-profit private sector financial reporting framework
At its meeting in March 2024, the Australian Accounting Standards Board (AASB) continued to develop its Exposure Draft of a proposed Tier 3 financial reporting framework for Not-for-profit private sector entities.
The AASB’s Action Alert 228 summarises the Board’s tentative decisions regarding the accounting policy choices and simplifications to the measurement, recognition and disclosure requirements that it proposes for Tier 3 Not-for-profit entities.
AASB Board meeting – March 2024
The AASB met on 7-8 March 2024, at which it discussed the following additional topics:
- Development of Not-for-profit Amendments to the Conceptual Framework
- Post-implementation Review – Income of Not-for-profit Entities
- Post-implementation Review – Superannuation Entities
- Response to the IASB Exposure Draft ED/2023/5 Financial Instruments with Characteristics of Equity (AASB ED 327)
- Service Performance Reporting; and
- Public Sector Workplan Update.
ASIC prosecutes for failure to have a Director Identification Number
The Australian Securities & Investments Commission (ASIC) has taken legal action against a company director for failing to obtain a Director Identification Number (DIN).
The DIN regime commenced in November 2021. A DIN is a unique identifier that helps track a director’s involvement with companies over time. This aims to improve transparency and accountability within the business sector.
The maximum penalty for not having a DIN when required is $13,320.
ASX Corporate Governance Principles and Recommendations 5th Edition Consultation
On 27 February 2024 the ASX Corporate Governance Council released its Consultation Draft for the 5th Edition of the Principles and Recommendations.
The proposed changes aim to strengthen listed entities’ governance and increase transparency for investors. The Consultation Draft retains the existing 8 Principles of Corporate Governance but proposes the removal, amendment, or addition of approximately 20 Recommendations.
The list of proposed changes from the 4th Edition Corporate Governance Principles and Recommendations are contained on page 5 of the Background Paper to the Consultation Draft.
Submissions on the proposals are due by 6 May 2024.
Professional Standards Scheme extension approved
The Chartered Accountants Australia and New Zealand Professional Standards Scheme (CA ANZ Scheme) has been extended until 12 July 2025.
This extension, approved by the Minister for Better Regulation and Fair Trading, allows more time for CA ANZ to develop a new Scheme application for the period of July 2025 to July 2030.
ACNC | Cyber security advice and templates
Charities are increasingly reliant on technology, but this also makes them vulnerable to cyberattacks. The ACNC’s Cyber Security Toolkit offers valuable resources to help charities:
- Know the risks: Identify critical information and assess vulnerability to cyberattacks.
- Educate the team: Train staff on cyber security best practices and data privacy.
- Secure systems: Use firewalls and access controls to safeguard networks and devices.
- Plan for the worst: Develop a clear response plan in case of a data breach.
Strong cyber defences protect data, ensuring service delivery and donor trust.
Post-implementation review of IFRS 15 Revenue from Contracts with Customers
At its February 2024 meeting, the International Accounting Standards Board (IASB) reviewed stakeholder feedback on the post-implementation review of IFRS 15 and tentatively decided to take no further action regarding:
- Identifying Performance Obligations: identifying a promise to transfer goods or services; applying the notion of a ‘distinct’ good or service; and other aspects of identifying performance obligations in a contract.
- Principal vs. Agent Considerations: identifying performance obligations in arrangements involving principal versus agent determinations and other aspects of principal versus agent determinations.
- Licencing: accounting for licence renewals; determining the nature of a licence; determining the scope of licencing guidance; accounting for sales-based or usage-based royalties; and other aspects of licencing.
The IASB will discuss the analysis of feedback on the other topics at future meetings.
Amendments to the classification and measurement of financial instruments
In February 2024, the IASB continued consideration of its proposed amendments to the classification and measurement of financial instruments under IFRS 9 relating to:
- derecognition of financial liabilities through electronic transfer;
- assessing contractual cash flow characteristics of financial assets, including those with environmental, social and governance (ESG)-linked features; and
- financial assets with non-recourse features and contractually linked instruments.
The IASB tentatively decided to begin the balloting process and to set an effective date for the amendments to IFRS 9 to annual reporting periods beginning on or after 1 January 2026.
Clarifying investments in associates and joint ventures – Equity method
During February and March 2024 the IASB also continued their project on clarifying accounting for investments in subsidiaries and joint ventures.
The IASB made the following tentative decisions:
- The IASB clarified that using the equity method for subsidiaries in separate financial statements requires following specific guidelines for step acquisitions (acquiring a subsidiary in stages).
- That an investor would account for and include in the carrying amount of its investment in an associate, a deferred tax asset (or liability) arising from recognising as part of the cost of the investment its share of the associate’s net identifiable assets and liabilities at fair value.
- An investor recognises contingent consideration as part of the cost of the investment and measures that contingent consideration at fair value.
- The project will not include guidance on how parent entities measure the cost of subsidiaries acquired in stages or how entities recognise acquisition costs for equity method investments.
- The Board decided not to expand the project’s scope to include specific application questions on measuring cost of investments and recognising acquisition costs.
The IASB will finalise transition provisions and due process before issuing an exposure draft for public comment.
IFRIC update – March 2024
The IFRS Interpretation Committee (IFRIC) held its meeting in March 2024.
The Committee finalised its deliberations on the following tentative agenda decisions:
- Climate-related commitments – relating to how IAS 37 Provisions, Contingent Liabilities and Contingent Assets applies to commitments made by entities to reduce or offset its future greenhouse gas emissions.
- Payment contingent on continued employment – about how an entity applies IFRS 3 Business Combinations to payments to the sellers of a business it has acquired if those payments are contingent on the sellers’ continued employment during a post-acquisition handover period.
The IASB will consider these agenda decisions at its April 2024 meeting. If the IASB does not object to the agenda decisions, they will be approved and published on the IASB’s website.
ACNC highlights areas for improvement in charity compliance
The Australian Charities and Not-for-profit Commission (ACNC) has released its latest report on compliance reviews conducted across the sector. The ACNC focused on areas like governance, financial management, sustainability, overseas programs, and responses to natural disasters like bushfires. While many charities demonstrated strong practices, the review identified potential areas for improvement in some organisations.
Key findings include:
- Governance concerns: Some charities faced issues with board composition, conflicts of interest, and inadequate risk management practices.
- Financial management: Concerns were identified regarding financial reporting, record-keeping, and internal controls.
- Overseas programs: The ACNC highlighted the need for better risk management and due diligence for charities operating internationally.
- Bushfire responses: While many charities played a crucial role in disaster relief, some lacked proper planning and documentation.
