AFS licensees required to prepare Tier 1 financial statements for 30 June 2022

Previously, some non-reporting entities holding Australian Financial Services (AFS) licences prepared special purpose financial statements (SPFS) for the Australian Securities and Investments Commission (ASIC). Following the removal of SPFS for years ended 30 June 2022, AFS licensees expected that they would need to transition to Tier 2 (Simplified Disclosures) GPFS.

AFS licensees with public accountability must always prepare Tier 1 GPFS.

When does an AFS licensee have public accountability?

An AFS licensee has public accountability if either:

• Its debt or equity instruments are traded in a public market, or it is in the process of issuing such instruments for trading in a public market
• It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. This includes AFS licensees that hold client monies.

Example of entities that hold assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses include: banks, credit unions, insurance companies, securities brokers/dealers, mutual funds, and investment banks.

AFS licensees deemed by ASIC to have public accountability

In practice, it may sometimes be difficult to determine whether an AFS licensee has public accountability. Therefore, ASIC is taking the approach outlined in its Media Release that the full disclosure requirements of IFRS (Tier 1 GPFS) must be applied by some licensees. This is to avoid doubt as to whether they have public accountability, or because they are large or sophisticated licensees with greater market impact.

These include licensees that are:

• Regulated by the Australian Prudential Regulatory Authority (APRA)
• Participants in a licensed market
• Participants in a clearing and settlement facility
• Retail over-the-counter derivative issuers
• Wholesale electricity dealers
• Corporate advisors that deal in 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
• Operators of an investor directed portfolio service.

By requiring Tier 1 GPFS, ASIC has effectively deemed a range of AFS licensees to have public accountability.

Separate or consolidated financial statements

Licensees must always present single entity financial statements. In addition, consolidated financial statements must be presented where the licensee has subsidiaries.

Transition relief for licensees reporting under Chapter 7 only

AFS licensees that previously prepared SPFS under Chapter 7 of the Corporations Act 2001 can choose to defer the new disclosure requirements by one year. That is, the first Tier 1 GPFS are required for financial years beginning on or after 1 July 2022.

If reporting at 30 June 2022, licensees will be able to continue preparing SPFS for 30 June 2022, but will need to prepare Tier 1 GPFS for 30 June 2023.

When preparing the first Tier 1 GPFS in 2023, comparative information need not be provided for additional Tier 1 disclosures. This exemption is only available for the first set of Tier 1 GPFS.

Transitional relief for licensees reporting under Chapter 2M and Chapter 7

All AFS licensees reporting under Chapter 2M must prepare, as a minimum, Tier 2 (Simplified Disclosures) GPFS for 30 June 2022. As noted above, AFS licensees that are deemed to have public accountability must prepare Tier 1 GPFS for Chapter 7 reporting.

Form FS 70

Changes to Form FS 70 Australian financial services licensee profit and loss statement and balance sheet will follow in late June 2022, as this will need to be adapted to cater for GPFS.

Need assistance?

Please contact our IFRS Advisory team if you would like further information, or if you require assistance with any financial reporting matters.