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.
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Treasury proposes climate reporting obligations
Treasury has set out its timetable for companies to report climate disclosures in Australia.
Key proposals include:
- Entities that are required to report under Chapter 2M of the Corporations Act 2001 and satisfy specified size thresholds will be required to make climate-related financial disclosures by 2027-28. This would be achieved in three tranches starting from 2024-25 based on the entity’s size and not whether it is a listed entity.
- Disclosures to be based on the expected Australian equivalent of IFRS S2 Climate-related Disclosures.
- Climate disclosures would be required to be published in an entity’s annual report. Hence, within three months after year end for disclosing entities and registered managed investment schemes, and four months for all other companies.
- Mandatory assurance of reported climate information. This would be achieved via progressively increasing assurance for each tranche of reporting entities, from a minimum limited assurance for that tranche first reporting in 2024-25 to all entities obtaining reasonable assurance on all disclosures by 2030.
Submissions to Treasury closed on 21 July and draft legislation is expected later this year.
Post-implementation review of AASB 9 Financial Instruments – Impairment
The Australian Accounting Standards Board (AASB) is seeking feedback regarding the effectiveness of the impairment requirements in AASB 9, specifically in terms of achieving more timely recognition of credit losses compared to the requirements outlined in AASB 139. Specifically, the Board seeks feedback on application issues and difficulties relating to:
- the general approach to recognising expected credit losses;
- determining significant increases in credit risk;
- measuring expected credit losses;
- the simplified approach for trade and lease receivables;
- purchased or originated credit-impaired financial assets;
- applying expected credit losses with other requirements in AASB 9;
- transition requirements; and
- credit risk disclosures.
Comments are due to the AASB by 18 August 2023.
ED 325 International Tax Reform – Pillar Two Model Rules – Tier 2 disclosures
The AASB proposes amendments to AASB 1060 to mirror the amendments introduced by AASB 2023-2 Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two Model Rules (June 2023).
The proposed amendments would require entities preparing Tier 2 General Purpose Financial Reports to adopt the mandatory temporary exception for deferred tax accounting relating to Pillar Two income taxes in AASB 112 Income Taxes and to provide the following disclosures:
- Confirmation of applying the temporary exception.
- The current tax expense (or income) associated with Pillar Two income taxes.
The amendments are proposed to apply to annual periods beginning on or after 1 January 2023 that end on or after 30 September 2023, with earlier application permitted.
Comments on ED 325 are due to the AASB by 22 August 2023.
Post-implementation review of AASB 15 Revenue from Contracts with Customers
The AASB has released a post-implementation review of AASB 15 seeking feedback on the following matters, amongst others:
- stakeholders’ overall views and experiences relating to AASB 15; and
b. information on specific areas of AASB 15, such as:
- identifying performance obligations in a contract;
- determining the transaction price;
- determining when to recognise revenue;
- principal versus agent considerations;
- disclosure requirements; and
- transition requirements.
The AASB is not seeking feedback on not-for-profit specific matters.
Comments are due to the AASB by 8 September 2023.
AUASB Bulletin – What not-for-profit entities need to know about the differences between an audit or review
The AUASB has issued a Bulletin to help NFP entities better understand the differences between an audit and review and to help them decide which may be more appropriate, taking into account their regulatory and legal framework.
CA ANZ issues essential reporting guides for June 2023
The CA ANZ Reporting Essentials Guides for June 2023 are now available. These publications highlight the impact of new and amending standards and legislative developments on the preparation of financial statements, performance reports and other external reporting. Other areas covered include:
- Financial reporting in uncertain times
- Sustainability reporting
- Regulator focus areas
- The Australian financial reporting framework reform
The reporting guide is available for CA ANZ members.
AASB Board Meeting – August 2023
The agenda and papers for the Australian Accounting Standards Board (AASB) meeting on 8 August are available.
The meeting will focus primarily on climate-related financial disclosures, including developing approaches to:
- non-authoritative guidance accompanying IFRS S1 and IFRS S2;
- the application of SASB Standards in context of the ISSB baseline; and
- GHG emission intensity metrics, internal carbon price metrics, and remuneration metrics for the purpose of the IFRS S2 baseline.
Industry funding: 2022-23 Cost Recovery Implementation Statement
ASIC published its Cost Recovery Implementation Statement (CRIS) for 2022-23. The statement details ASIC’s estimated levies by industry subsector.
CRIS provides information on how ASIC implement the industry funding model and recover:
- the costs of regulatory activities for each industry subsector in 2022–23, and
- their user-initiated and transaction-based regulatory costs via fees for service in 2022-23.
The figures in the CRIS are indicative only. Invoices will be issued between January and March 2024 after actual levies have been calculated.
Refer to ACSC website for more details on how to stay secured amidst the identified cyber threats.
International Accounting Standards Board (IASB) update – July 2023
The summary of the IASB meeting held on 25 – 27 July 2023 has been released. Key topics discussed include:
- Equity Method – the IASB tentatively decided to propose amendments to IAS 28Investments in Associates and Joint Ventures:
- to add as objective evidence of impairment a purchase price an investor pays for an additional interest in an associate, or a selling price for part of the interest, that is lower than the carrying amount of the investment in the associate at the date of the purchase or sale of that interest.
- to remove the term ‘significant or prolonged’ decline in value as objective evidence of impairment.
- Business Combinations (Disclosures, Goodwill and Impairment) – the IASB tentatively decided on the following:
- to clarify the operation of a number of requirements relating to the operation of impairment tests;
- to require an entity to disclose the reportable segments in which cash-generating units containing goodwill are included; and
- to provide unlisted entities that apply full IFRS Accounting Standards with no exemptions from disclosing information about the subsequent performance of business combinations.
- Extractive Activities – The IASB discussed stakeholder feedback on ways to improve disclosures about an entity’s exploration and evaluation expenditure and activities.
- Primary Financial Statements – the IASB finalised deliberations of the prospective IFRS Accounting Standard IFRS XGeneral Presentation and Disclosures that will replace IAS 1 Presentation of Financial Statements.
The new Standard will:
- introduce additional defined subtotals in the statement of profit or loss;
- disclosure requirements for management performance measures; and
- strengthen the requirements for aggregating and disaggregating information.
The new Standard will be applicable for annual periods beginning on or after 1 January 2027.
- Provisions (Targeted Improvements) – the IASB considered possible amendments to IAS 37Provisions, Contingent Liabilities and Contingent Assets relating to the appropriate discount rate to use for provisions and the costs to include in measuring a provision.
The IASB tentatively decided the costs relating directly to settling an obligation consist of both:
- those incremental costs; and
- an allocation of other costs that relate directly to settling obligations of that type.
The IASB will continue discussing possible amendments to IAS 37 at future meetings.
ISSB publishes comparison of IFRS S2 with the TCFD Recommendations
The International Sustainability Standards Board (ISSB) has published a comparison of the requirements in IFRS S2 Climate-related Disclosures and the Task force on Climate-related Financial Disclosures (TCFD) recommendations.
The comparison highlights that:
- the requirements in IFRS S2 are consistent with the four core recommendations and eleven recommended disclosures published by the TCFD;
- companies that apply the ISSB Standards will meet the TCFD recommendations and so do not need to apply the TCFD recommendations in addition to the ISSB Standards; and
- There are additional disclosure requirements in IFRS S2.
July 2023 ISSB podcast now available
ISSB Vice-Chair Sue Lloyd and ISSB Chair Emmanuel Faber discuss the latest developments from the board, including:
- progress since the launch of IFRS S1 and IFRS S2;
- the development of technical updates and educational materials on IFRS S2; and
- the upcoming International Auditing and Assurance Standards Board (IAASB) consultation on assurance of climate disclosures.
IFRS accounting requirements for climate-related matters in financial statements
The International Accounting Standards Board (IASB) has released an updated edition of its educational resource designed to assist companies in evaluating the incorporation of climate-related aspects while preparing their financial statements in accordance with IFRS Accounting Standards.
The updated guide explores how climate-related factors can affect the measurements and disclosures in IFRS Accounting Standards.
ASIC’s focus areas for 30 June 2023 financial reports
ASIC released its focus areas for 30 June 2023 financial reports and has called for financial statement preparers to assess the impact of uncertain market and economic conditions through better disclosure of business risks and strategies, and asset values in the financial report.
ASIC noted that better information about uncertainties, key assumptions, business strategies and risks are important to stakeholders.
ASIC further notes that companies will continue to be affected differently by changing and uncertain economic and market conditions depending on their industry, where they operate, how their suppliers and customers are affected, and a range of other factors.