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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Consolidated Entity Disclosure Statement (CEDS)
Listed and unlisted public companies that report under Chapter 2M of the Corporations Act 2001 are required to include a Consolidated Entity Disclosure Statement (CEDS) within its 30 June 2024 financial report.
Companies limited by guarantee reporting under the Corporations Act must prepare a CEDS, even if they are exempt from income tax.
The Australian Securities and Investments Commission (ASIC) recently issued Information Sheet 284 to guide preparers on ensuring the CEDS comply with the Corporations Act and its policy intent.
The CEDS must disclose – for all subsidiaries regardless of size or materiality – the entity’s name, entity type, country of incorporation, percentage of share capital held by the parent, and its tax residency.
A public company that has no subsidiaries or is not required to prepare consolidated financial statements is still required to include a CEDS.
AASB decisions on draft climate-related standards
Following its decision in June 2024 to align Australian standards more closely with international sustainability standards, the Board decided to revert to the IFRS Sustainability Disclosure Standards baseline by:
More closely aligning ASRS 2 to IFRS S2 by removing:
- reference to the global temperature goal set out in the Climate Change Act 2022 in performing climate-related scenario analysis;
- ‘key management personnel’ and ‘compensation’ definitions for the purpose of cross-industry remuneration metrics;
- the ability of an entity to measure and disclose its Scope 3 GHG emissions using data for the immediately preceding reporting period in certain circumstances;
- mandatory requirements relating to additional and specific financed-emission disclosures;
- reference to carbon credits issued under the Australian Carbon Credits Units Scheme (ACCUs) and adopt the IFRS S2 definition of carbon credits without modification;
- the requirement for an entity, having no material climate-related risks and opportunities, to disclose that fact and how it came to that conclusion;
- the requirement for entities to use the Australian and New Zealand Standard Industrial Classification (ANZSIC) as the basis when voluntarily providing industry-based disclosures; and
- explicit provisions permitting voluntary disclosures based on alternative frameworks (eg, SASB Standards), while not prohibiting such disclosures.
With respect to the mandatory ASRS 2, the Board has decided to deviate from the IFRS Sustainability Disclosure Standards by not requiring an entity to refer to and consider SASB Standards, IFRS S2 Industry-based Guidance or provide sector-based disclosures.
The Board will continue its deliberations at subsequent meetings.
Climate reporting considerations – For Purpose (Not-for-profit) and public sector entities
Recognising the potential impact on For Purpose (Not-for-profit) and public sector entities of the AASB's decision to streamline the baseline requirements of international sustainability reporting standards, the Board decided to initiate a separate project to develop additional guidance for these entities. The project will also address scalability and cost-benefit concerns.
Following the finalisation of ASRS 1 and ASRS 2, the Board will prioritise new projects added to its work plan and consider the need for additional guidance on other aspects of ASRS 2.
CA ANZ releases 2024 essential financial reporting guides
CA ANZ members can access the latest financial reporting guides for both Australia and New Zealand. These guides cover key updates for the June 2024 reporting period, including new and amended accounting standards, legislative developments, accounting policies, Not-for-profit reporting, sustainability reporting, and regulator focus areas amongst others.
ASIC extends rounding rules
ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 has been amended to extend the application of rounding of certain amounts in financial reports to corporate collective investment vehicles (CCIVs) and registrable superannuation entities (RSEs).
Is your company permitted to hold virtual-only meetings
In response to the COVID-19 pandemic, the Australian Government and ASIC implemented a range of temporary measures to hold meetings of members flexibly, due to ongoing restrictions on gatherings. In 2022, permanent amendments were made to allow for virtual-only meetings if they were expressly permitted or required by an entity’s constitution.
Companies (including corporate collective investment vehicles (CCIVs)) and registered schemes can hold virtual-only meetings of members if expressly required or permitted by their constitutions.
For the 2024 annual general meeting (AGM) season, companies should ensure their constitutions have been amended if they wish to hold virtual-only meetings of members.
Cybersecurity alert: Phishing attempts following CrowdStrike outage
On 19 July 2024, a faulty update from cybersecurity firm CrowdStrike caused a global outage impacting Microsoft Windows systems. While CrowdStrike addresses the issue, reports indicate phishing emails are circulating, claiming to be from CrowdStrike or Microsoft and offering to expedite fixes.
The Australian Cyber Security Centre (ACSC) urges users to seek technical information and updates only from official CrowdStrike sources.
ASIC insolvency data reveals increase in companies failing
ASIC’s annual insolvency data shows more than 11,000 companies entered external administration for the first time in 2023-24.
The top three sectors – Construction (27%), Accommodation and Food Services (15%) and Other Services (9%) represented over half of total external administrations for 2023–24.
Companies preparing their 30 June 2024 financial report that have a concentration of customers in these sectors should consider the financial reporting implications of this data, including on expected credit losses on their trade receivables.
Investment in associates - Equity method
On its June 2024 meeting, the International Accounting Standards Board (IASB) made the following tentative decisions in relation to drafting the exposure draft Equity Method of Accounting—IAS 28 Investments in Associates and Joint Ventures:
- Parent-to-associate transition: If a parent entity applies the equity method to its investment in a subsidiary in its separate financial statements, then loses control of that subsidiary which becomes an associate, the parent will continue using the equity method in accordance with paragraph 24 of IAS 28.
- Income recognition: Not to specify the line item where any excess of the entity’s share of the net fair value of the investee’s identifiable net assets over the cost of the investment is reported in the investor’s profit and loss statement.
- Contingent consideration disclosure: The same disclosure requirements will apply to contingent consideration for additional interests in associates or joint ventures as on obtaining significant influence or joint control.
- Contingent consideration measurement: Contingent consideration recognised by an investor as an equity instrument and initially measured at fair value would not be subsequently remeasured.
The IASB expects to release an exposure draft in the third quarter of 2024.
Post-implementation review of IFRS 9 — Impairment
The IASB released the project summary and feedback statement for its post-implementation review of IFRS 9 Financial Instruments—Impairment.
The Board concluded that the impairment requirements of IFRS 9 are working as intended. However, the Board decided to consider the following matters for future projects:
- simplifying some credit risk disclosures,
- the consequences of financial guarantee contracts on the expected credit losses of related financial instruments, and
- the intersection of the impairment requirements with other requirements in IFRS 9.
Read more >>
Annual improvements to IFRS Accounting Standards – Volume 11
The IASB has issued narrow amendments to IFRS Accounting Standards. The annual improvements are limited to changes that either clarify the wording in an IFRS Accounting Standard or correct relatively minor unintended consequences or oversights in the Accounting Standards. They also correct minor conflicts between the requirements of the Accounting Standards.
The revisions affect the following Accounting Standards:
- IFRS 1 First-time Adoption of International Financial Reporting Standards
- IFRS 7 Financial Instruments: Disclosures and accompanying Implementation Guidance
- IFRS 9 Financial Instruments
- IFRS 10 Consolidated Financial Statements
- IAS 7 Statement of Cash Flows
The amendments take effect for annual periods beginning on or after 1 January 2026, with earlier application permitted.
The AASB are expected to issue Australian equivalent amendments in due course.
IFRIC podcast – Q2 2024
The IFRIC Interpretations Committee (IFRIC) addressed the disclosure of revenues and expenses for reportable segments under IFRS 8 in their Q2 2024 podcast.
Subsequently, at the IASB’s July 2024 meeting, the Board finalised their decision from the November 2023 agenda, opting not to develop a standard-setting project on this matter.
2024 Financial Reporting Update Recording
The recording of our financial reporting update webinar held on 23 May, and relevant materials, are available on our website.
Our webinar explored:
- The key accounting standards and financial reporting changes for 30 June 2024;
- How recent changes will affect the classification of loans with annual review clauses, covenants, and other conditions;
- Legislative changes affecting companies, registered charities, and other For Purpose (Not-for-profit) entities;
- How companies will be affected by the sustainability and climate-related disclosure projects; and
- Developments in Australian and international financial reporting projects.
Status of climate-related disclosures Bill
On 6 June 2024, the House of Representatives passed the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 without amendment. The Bill introduces staged mandatory climate-related disclosures for entities required to report under Chapter 2M of the Corporations Act 2001 within their annual report.
The Bill is now subject to passage in the Senate where the government, with the support of the Greens, has proposed amendments to specify the disclosure of at least the following two climate scenario analyses – an increase in the global average temperature of 1.5°C above pre‑industrial levels, and 2.5°C above pre‑industrial levels.
The Opposition has also proposed amendments to remove Group 3 entities from the mandatory reporting requirements.
If those amendments pass the Senate, the Bill will need to return to the House for approval.
Parliament resumes after the winter break on 12 August.
If enacted, the law will apply to Group 1 entities commencing from annual reporting periods beginning on or after 1 January 2025.
