ASIC releases updated financial reporting requirements for AFS licensees

Specifically, from financial years commencing July 1, 2021, for-profit companies, registered schemes, and disclosing entities preparing financial reports under Chapter 2M of the Corporations Act 2001 (the Act) – and which are not reporting entities – can no longer prepare special purpose financial reports (SPFRs) that do not contain all disclosures required in the full accounting standards.

All entities must apply the requirements for assets, liabilities, income, and expenses. Meanwhile, entities without public accountability can use a simplified disclosure regime. On the other hand, entities with public accountability must comply with the full standards’ disclosure requirements. Entities have public accountability if:

Their debt or equity instruments are traded in a public market, or they are in the process of issuing such instruments for trading in a public market; or
They hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses.

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AASB’s new reporting regime will apply to the Chapter 7 financial reports of most AFS licensees, using the public accountability test. Meanwhile, some licensees must apply the full standards’ disclosure requirements to avoid doubt about whether they have public accountability or because they are large or sophisticated licensees with a more significant market impact. These licensees are:

Regulated by APRA;
Participants in a licensed market;
Participants in a clearing and settlement facility;
Retail over-the-counter derivative issuers;
Wholesale electricity dealers;
Corporate advisors dealing with financial products;
Over-the-counter derivative traders;
Wholesale trustees;
Responsible entities of a registered scheme;
Corporate directors of a corporate collective investment vehicle;
Providers of a custodial or depository service; and
Operators of an investor-directed portfolio service.

Commenting on the changes, ASIC Commissioner Sean Hughes said: “These reporting changes will assist those who prepare financial reports under both sets of requirements and provide relevant information for ASIC’s surveillance of licensees and for other users of financial reports.”

The changes in financial reporting requirements follow ASIC’s revision of the class order product disclosure statement (PDS) requirements for quotes provided for a general insurance product.