What’s new for 30 June 2022 annual and half-year financial reports?

When preparing 30 June 2022 annual and half-year financial reports, entities should consider the following:

Please refer to our recent webinar, Getting ready for 30 June 2022 for more information.

Transitioning to general purpose financial statements

Entities that prepare special purpose financial statements (SPFS) cannot avoid transitioning to general purpose financial statements (GPFS) any longer. For the 30 June 2022 annual reporting periods, for-profit private sector entities must prepare GPFS if either:

  • They are required by legislation to prepare financial statements, in accordance with Australian Accounting Standards or ‘accounting standards’
  • They are required by their constitution or other documents, such as a lending agreement, to prepare financial statements in accordance with Australian Accounting Standards.
The following types of entities that previously prepared SPFS will need to prepare GFPS for the 30 June 2022 annual reporting period:
  • Unlisted public companies
  • Large proprietary companies, including ‘grandfathered entities’
  • Small proprietary companies raising money via crowd-sourced funding
  • Small foreign controlled proprietary companies preparing financial statements under Chapter 2M of the Corporations Act 2001
  • AFS licensees reporting under Chapter 7 of the Corporations Act 2001
  • Foreign registered companies with no overseas requirement to prepare financial statements - section 601CK(5), (5A) and (6) of the Corporations Act 2001.

Tier 1 or Tier 2?

We anticipate that most SPFS can transition to Tier 2 (Simplified Disclosures), as they are unlikely to be ‘publicly accountable’. ‘Publicly accountable’ entities include:

  • Listed entities
  • Unlisted disclosing entities
  • Entities holding assets in a fiduciary capacity for a broad range of outsiders as one of its primary businesses (e.g. banks, credit unions, insurance companies, etc.)
  • Co-operatives that issue debentures
  • Registered managed investment schemes
  • Superannuation plans regulated by APRA.
Not-for-profit entities that previously prepared GPFS (Reduced Disclosures) must transition to GPFS (Simplified Disclosures) for 30 June 2022 because the Reduced Disclosures have now been withdrawn. However, those entities that prepare SPFS can continue to do so for the 30 June 2022 annual reporting period.

Not just a disclosure exercise

Transitioning to Simplified Disclosures may simply be a ‘disclosure exercise’ for entities that previously applied all recognition and measurement requirements of Australian Accounting Standards. However, it can be a complex process where consolidated financial statements are required for the first time, or if the entity did not previously apply all the recognition and measurement requirements. In such cases, decisions need to be made regarding the best transition method (i.e. applying IAS 8 or IFRS 1), as well as the various transition exemptions.

Need help?

If you require assistance, please refer to our guide: Five steps to successful GPFS transition. By following these five simple steps, it can help to ensure that you avoid unnecessary speed-bumps in your GPFS transition journey. Our team of IFRS specialists across Australia can help you to take the wheel and guide your entity to its destination.

More information

For more information, please refer to our webinar - Applying IFRS 1 to transition to general purpose financial statements.

New standards

There are new standards that will apply for the first time to the annual and half-year periods ending on 30 June 2022. The main new standards are outlined in the table below.

Standard number

Standard name

Applies to periods

Annual periods

Half-year periods

Resources

AASB 1060

General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities

Beginning 1 July 2021

N/A

Simplified Disclosures (AASB 1060)

First-time adoption of Australian Accounting Standards/IFRS (IFRS 1/AASB 1)

AASB 2020-2

Amendments to Australian Accounting Standards – Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities

Beginning 1 July 2021

N/A

Simplified Disclosures (AASB 1060)

First-time adoption of Australian Accounting Standards/IFRS (IFRS 1/AASB 1)

AASB 2022-2

Amendments to Australian Accounting Standards – Extending Transition Relief under AASB 1

Ending 30 June 2022

N/A

More relief in AASB 1 for entities transitioning to general purpose Simplified Disclosures financial statements

AASB 2021-3

Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions beyond 30 June 2021

Beginning 1 April 2021

Recommended early adoption for 30 June 2021

N/A

Leases (IFRS 16/AASB 16)

AASB 2020-8

Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2

Beginning 1 January 2021

N/A

 

AASB 2020-3

Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments

Beginning 1 January 2022

X

Annual improvements and other amendments to IFRS standards - New eLearning materials available

N/A: Either because there are no half-year reporting obligations, or they applied for first time in the 31 December 2021 half-year reporting period.

New IFRIC agenda decisions

Entities need to consider whether the IFRIC agenda decisions outlined in the table below, which were approved during the past 12 months, could affect their 30 June 2022 financial statements.

Decision

Resources

Principal versus agent – software reseller

IFRIC agenda decision - Principal versus agent: software resellers

Demand deposits with restrictions on use arising from a contract with a third party

IFRIC agenda decision - Demand deposits with contractual restrictions on use

Economic benefits from use of a wind farm

Latest IFRIC agenda decision - Do virtual power purchase agreements contain a lease?

Non-refundable value added taxes on leases

Non-refundable value added tax (VAT) on lease payments (IFRS 16)

BDO Global’s IFRS in Practice 2019/2020 - IFRS 16 Leases – Refer to Example 18

Accounting for warrants that are classified as financial liabilities on initial recognition

Accounting for warrants that are classified as financial liabilities on initial recognition (IAS 32)

Costs necessary to sell inventories

Latest IFRIC agenda decisions – Costs necessary to sell inventories and non-going concern financial statements

Non-going concern financial statements

Latest IFRIC agenda decisions – Costs necessary to sell inventories and non-going concern financial statements

Any remaining adjustments resulting from the April 2021 agenda decision - Configuration or customisation costs in a cloud computing arrangement - need to be made in 30 June 2022 financial reports. For more information, please refer to our Corporate Reporting Insights article - SAAS implementation costs – Do you need to write these off at 30 June 2021?.

ASIC focus areas and FAQs

At the time of writing, the Australian Securities and Investments Commission (ASIC) has not yet granted any extensions to the reporting deadlines for 30 June 2022 financial reports. Therefore, entities should aim to report within the usual timeframes that are applicable to their organisation.

Consistent with prior years, ASIC will review 30 June 2022 financial reports as part of its financial reporting surveillance program. Its main focus areas will be:

  • Asset values
  • Provisions
  • Solvency and going concern assessments
  • Subsequent events
  • Disclosures in the financial report and the Operating and Financial Review (OFR).

You can find more information in our article - ASIC focus areas for its surveillance of 30 June 2022 financial reports.

Aged care providers should take note of ASIC’s FAQ 9D regarding amortisation and impairment of bed licences. Please refer to our previous article on this topic for more information.

Classification of employees and contractors – Employee benefit provisions

Employees are entitled to various benefits under the National Employment Standards, including: annual leave, parental leave, personal/carer’s leave, community service leave, long service leave, public holiday leave, and termination/redundancy pay. However, contractors have no such entitlements.

Classification is important to ensure that adequate provision is made in the financial statements for employee benefits.

The two recent High Court decisions in ZG Operations v Jamsek and CFMMEU v Personnel Contracting highlight that the relationship between organisations and workers is dependent on rights and obligations set out in a written legal agreement (contract), rather than the day-to-day workings of the relationship. Entities must revisit employment contracts to ensure that employees are appropriately classified, and the correct amount of employee benefit provisions are recognised in the 30 June 2022 financial statements.

Please refer to our previous article for more information.

Climate-related matters

Although the IFRS standards do not explicitly refer to climate-related matters, there is increasing awareness that such issues may have an impact on financial reporting. With this in mind, the IASB released educational materials summarising how companies must consider climate-related matters when applying the IFRS standards.

Businesses should consider these educational materials when preparing 30 June 2022 financial statements because these matters may have a material impact. This includes when determining values for assets, liabilities and provisions, as well as when making disclosures regarding estimates and judgements.

Please refer to BDO Global's IFRB 2020/14 for a summary of these materials. More resources on sustainability matters are available on our sustainability reporting webpage.

Specific requirements for not-for-profit entities (NFPs)

Because the reporting thresholds have increased, some NFPs may no longer require financial reports. These thresholds are outlined in the table below.

Size

Previous revenue thresholds

New revenue thresholds

Audit/review required?

Small

Less than $250,000

Less than $500,000

No

Medium

$250,000 to $1 million

$500,000 to $3 million

Review/audit

Large

Greater than $1 million

Greater than $3 million

Audit

Please refer to our previous article for more information about the composition of ‘revenue’, for the purposes of assessing reporting thresholds.

KMP compensation

Large charities with more than one key management person (KMP) are required to disclose aggregate key management personnel compensation for the first time. KMPs include responsible persons such as the board, committee members, trustees, etc. Compensation must be disclosed, even if KMP services are provided by a separate management entity. Comparatives are not required in this first year.

Please refer to our previous article for more information.

Peppercorn leases

NFPs will be relieved that the Australian Accounting Standards Board has decided to permanently allow the ‘cost option’ for peppercorn leases as it avoids the need for costly valuations of right-of-use assets.

Please refer to our previous article for more information.

Non-refundable upfront fees

There is diversity in the way that NFPs account for non-refundable upfront fees. Some recognise it as a contract liability and defer revenue until goods and services have been provided. Others recognise revenue on receipt because the amount is non-refundable. Illustrative Example 7A has been added to AASB 15 to illustrate the appropriate accounting.

Please refer to our previous article for more information.

Need assistance?

Please contact our IFRS Advisory team if you require assistance with any financial reporting matters for your 30 June 2022 annual and half-year financial reports.