Feb 12, 2021 / News

Financial Reporting

Financial Reporting Developments - Summer 2021

Extension of reporting deadlines for 31 December 2020 

As mentioned in our 2020 Spring edition of NEXT, companies with a 31 December 2020 reporting date have a one month extension to lodge their half-year and annual financial reports under Chapters 2M and 7 of the Corporations Act 2001. This means that the deadlines for reporting to ASIC: 

  • for listed entities – 31/12/2020 full year accounts are due within 4 months;
  • for listed entities – 31/12/20 interim financial reports are due within 75 days plus 1 month; and
  • for proprietary companies - 31/12/2020 full year accounts are due within 5 months.

The directors’ report must disclose that the company has applied the ASIC relief to report to members no later than one month after the normal reporting deadline. ASIC’s relief is automatic and entities do not need to apply to ASIC in order to take advantage of the reporting extensions. 

The ASX has issued a Listing Rule waiver to mirror the above ASIC lodgment extensions in respect of entities lodging their Appendix 4D or Appendix 4E for 31 December 2020.  A listed entity will be required to inform the market before its normal reporting deadline if it is relying on the extended period for lodging its audited full year or reviewed interim financial report.  

New disclosures for not-for-profit entities’ 31 December 2020 financial statements

Not-for-profit (NFP) entities preparing special purpose financial statements (SPFS) at 31 December 2020 that are either:

  1. Medium or large charities (ie, with annual revenue of $250,000 or more) registered with the Australian Charities and Not-for-profits Commission; or
  2. Required to lodge financial statements with ASIC under the Corporations Act 2001 (eg  certain companies limited by guarantee),

will need to disclose their compliance with the recognition and measurement (R&M) requirements of Australian Accounting Standards (AAS).  Other NFP entities preparing SPFS are not affected by these changes.

These entities must now disclose:

  1. the reason why SPFS were prepared;
  2. for each material accounting policy applied that does not comply with the R&M requirements in AAS, an indication of how it does not comply, or that the assessment has not been made; 
  3. whether or not the financial statements overall comply with all the R&M requirements in AAS or that such an assessment has not been made; and
  4. whether its subsidiaries and investments in associates or joint ventures have been consolidated or equity accounted in accordance with AASB 10 or AASB 128. If the entity has not applied those standards it must disclose that fact and the reasons why, or that the assessment has not been made. 

Decision time approaching for for-profit entities converting to general purpose financial statements

From 1 July 2021, for-profit entities preparing financial statements in accordance with the Corporations Act 2001, other legislation, their constituting documents or other agreements will not be permitted to prepare SPFS. From the same date, the existing Tier 2 Reduced Disclosure Regime is replaced by AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities (SDR). 

An optional short-term exemption applies from having to restate comparative information (ie, the comparatives remain under its previous SPFR or RDR bases) if a for-profit entity early adopts AASB 1060 for periods beginning before 1 July 2021.  Otherwise, if it waits until 2022, comparatives will need to be restated.

Those affected entities with a 30 June 2021 balance date have a decision to make within the next 4 months.  Either move to general purpose financial statements and early adopt AASB 1060 for 30 June 2021 thereby avoiding adjusting any 2020 comparative information, or wait until 30 June 2022 in which case the 2021 comparatives will need to be remeasured and restated. 

Our Financial Reporting Advisory team can assist you with the transition from SPFS to SDR and help analyse the effects of applying the new regime in 2021 or 2022. 

Not-for-profit entities considering early adopting AASB 1060 SDR 

Some NFP clients may be considering transitioning from SPFS and early adopting SDR.  While AASB 1060 may be applied by not-for-profit entities, the exemption from restating comparative information for entities transitioning from SPFS to SDR does not apply to NFP entities.  Consequently, a not-for-profit entity is required to apply SDR fully retrospectively which puts them at a disadvantage compared to for-profit entities. 

Payment Times Reporting obligations

Finally, a reminder that the Payment Times Reporting Act 2020 commenced on 1 January 2021.  

The Act requires an entity or group with annual total income of more than $100m to prepare a Payment Times Report every 6 months.  A Payment Times Report includes information on the entity’s standard payment periods and the proportion and value of invoices that were paid within specified time bands to its small business suppliers during that period.  A small business supplier is one that has annual turnover of less than $10 million. 

If you haven’t done so already, affected entities should:

  • ensure their standard payment periods are identified and documented; 
  • review the availability and quality of information that will be required to be reported;
  • consider whether accounts payable systems are capable of capturing and reporting the required information. For example, are systems able to identify a small business sub-set of total accounts payable and generate the specific information required by the Act; and
  • review and stratify supplier payment terms and average payment times.

How can Nexia Edwards Marshall help you?

If you require assistance preparing for any of these changes, or for any further information, please contact Jamie Dreckow or your Nexia Edwards Marshall Advisor.  

The material contained in this publication is for general information purposes only and does not constitute professional advice or recommendation from Nexia Edwards Marshall. Regarding any situation or circumstance, specific professional advice should be sought on any particular matter by contacting your Nexia Edwards Marshall Adviser.