Ten things to remember for 31 December 2024 annual and half-year reporting

This article highlights ten things to remember when preparing 31 December 2024 financial statements. Entities should also consider ASIC’s four enduring focus areas for its surveillance of 31 December financial reports (asset values, provisions, subsequent events and disclosures), as well as continuing global geopolitical and economic uncertainty, including the impact of interest rate increases and inflation, and the effects those uncertainties might have when accounting for various items in your financial statements.

Not-for-profit entities (NFPs) should consider the above matters where relevant. In particular, companies limited by guarantee that are not registered with the Australian Charities and Not-for-profits Commission (ACNC) must prepare their first consolidated entity disclosure statement, and public sector NFPs must apply the new fair value measurement guidance for non-financial assets. We also remind charities registered with the ACNC preparing special purpose financial statements that related party and key management personnel disclosures must be provided.

Public companies (listed and unlisted) will include a ‘consolidated entity disclosure statement’ (statement) in their annual financial report for the first time, resulting in more information disclosed about each subsidiary and their tax residency at the end of the financial year. The statement must be audited. The directors will also have to declare that this information is ‘true and correct’, and the Chief Executive Officer and the Chief Financial Officer declaration for listed groups will have to do the same. Companies limited by guarantee reporting under Chapter 2M of the Corporations Act 2001, rather than the Australian Charities and Not-for-profits Commission Act 2012, must also prepare this new statement.

There is no exemption for immaterial and dormant subsidiaries. Public companies that do not have subsidiaries, or those not required to prepare consolidated financial statements by AASB 10 Consolidated Financial Statements must still prepare the statement, although it will be brief.

The information required in the statement is not the same as that required under AASB 12 Disclosure of Interests in Other Entities and must be provided as a separate statement, after the notes to the financial statements.

The new disclosures are part of the Government’s response to enhance scrutiny of multinational companies and how they structure their tax arrangements via their subsidiaries operating in different jurisdictions.

Start preparing as soon as possible. Streamline group structures, where possible, before 31 December, and ensure all subsidiaries are identified and documented, including their tax residencies. Our previous article provides more detail.

These changes apply to annual periods beginning on or after 1 January 2024. Classification of your liabilities may be impacted by one or more of the changes to AASB 101 Presentation of Financial Statements, namely:

  1. The right to defer settlement need not be unconditional and must exist at the end of the reporting period
  2. Classification is based on rights to defer, not intention
  3. Early conversion options for convertible notes that can be settled before maturity by issuing the entity’s own equity instruments will result in the underlying liability being classified as CURRENT if the conversion feature is classified as a liability/derivative liability rather than as equity.  

Regarding a., if your entity has loan arrangements subject to covenants, the amendments clarify when the covenants affect classification at the reporting date. This is illustrated in the diagram below.
A flow diagram for entities complying with covenant before the reporting date.
Assessing whether the entity must comply with a loan covenant before the reporting date may depend upon whether bankers have provided a ‘waiver’ or a ‘period of grace’. Our publication uses a flowchart and examples to help you determine the correct classification of your loan arrangements. 

With the Australian Government committed to reducing Australia’s greenhouse gas emissions by 43% below 2005 levels by 2030, and achieving net zero emissions by 2050, preparers need to consider the implications of climate-related matters when preparing 31 December 2024 financial statements. Educational materials published by the International Accounting Standards Board (IASB) summarise how companies must consider climate-related issues when applying IFRS® Accounting Standards. This includes when determining values for assets, liabilities, and provisions, and making disclosures regarding estimates and judgements. Please refer to our publication for a summary of these educational materials. ESMA’s ‘Heat is On’ Report also provides real-life, practical examples to illustrate how entities can improve their climate-related disclosures for areas where climate matters are likely to have the greatest impact. Our article contains more information on this. More resources on sustainability matters are available on our sustainability reporting web page.

Australian listed entities should also note that the Australian Securities Exchange (ASX) and the Australian Securities and Investments Commission (ASIC) expect disclosure of climate-related risks and opportunities using the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) recommendations. This applies to the Corporate Governance Statement and the Operating and Financial Review.

Sustainability reporting

Legislation to mandate sustainability reporting in Australia was passed by the Senate on 22 August 2024 and received Royal Assent on 17 September 2024. The start date is for years commencing 1 January 2025, with a phase-in period for entities of different sizes and types. Entities required to prepare and lodge financial reports with the Australian Securities and Investments Commission (ASIC) under Chapter 2M of the Corporations Act 2001 may have to prepare sustainability reports if they meet certain criteria. In particular, very large entities and those meeting the publication thresholds in the National Greenhouse and Energy Reporting Act 2007 (NGER Act), referred to as ‘Group 1’ entities, will have to prepare a sustainability report as part of their 31 December 2025 annual report. Climate-related disclosures are the first, and currently the only component of mandatory sustainability reporting. Although not immediately effective, this is a significant new area of reporting and entities will require a significant time investment to derive the required information. Please contact our sustainability reporting experts if you need help.

The table below summarises amendments to standards that apply for the first time to 31 December 2024 annual and half-year periods. The changes for classifying liabilities and supplier finance arrangements are likely to affect many entities. Please ensure you have considered the impact of these in your 31 December 2024 annual and half-year financial statements. You can find more information about these amendments in the listed resources, or contact our IFRS & Corporate Reporting team for assistance.

Amending standard number 

Topic

BDO resources

AASB 2020-1, AASB 2022-6, AASB 2023-3 (amendments to AASB 101)

Classification of liabilities as current or non-current

Publication

Bulletin

AASB 2023-1 (amendments to AASB 107 & AASB 7) 

Supplier finance arrangements

IASB approves changes to the accounting for supplier finance arrangements

How to account for reverse factoring/supply chain financing arrangements

AASB 2024-1

Supplier finance arrangements: Tier 2 disclosures

Tier 2 disclosures for supplier finance arrangements

AASB 2022-5 (amendments to AASB 16)

Lease liability in a sale and leaseback

Lease liabilities for sale and leaseback transactions to include variable lease payments that do not depend on an index or rate

AASB 2022-10 (amendments to AASB 13)

Fair value measurement of non-financial assets of not-for-profit public sector entities

AASB issues long-awaited fair value measurement guidance for not-for-profit public sector entities

The Australian Government has implemented the Pillar Two ‘top-up’ tax regime in Australia for large multinational entity (MNE) groups, with the three relevant Bills passed by both Houses of Parliament on 27 November 2024. These bills introduce a new tax system that is separate from the Income Tax Assessment Act. The legislation introduces:

  • The income inclusion rule (IIR), a top-up tax payable by Australian parent entities of MNE groups where any of their subsidiaries have an effective tax rate of less than 15%, and
  • The qualifying domestic minimum top up tax (QDMTT), a top-up tax where an Australian member of an MNE group has an effective tax rate of less than 15%.

These rules will apply to MNE groups with consolidated revenue exceeding €750 million for financial years beginning on or after 1 January 2024. In addition, further legislation will be introduced for the undertaxed profits rule (UTPR), which will apply a year later in 2025.

Entities part of an MNE group with consolidated revenue exceeding €750 million must assess and recognise Pillar Two tax liabilities for the IIR and QDMTT as appropriate. Our article contains more information .

IFRS Interpretations Committee (Committee) agenda decisions are those issues the Committee decided not to take onto its agenda. Although not authoritative guidance, these decisions are regarded as being highly persuasive in practice. All entities reporting under IFRS® Accounting Standards should be aware of these decisions, as they could impact how particular transactions and balances are accounted for. While agenda decisions have no start date, they are expected to be applied as soon as possible, usually by the next reporting date. Agenda decisions merely clarify existing accounting principles. Therefore, any adjustments required are generally treated as a voluntary change in accounting policy (with retrospective restatement), rather than an error.

Over the past twelve months, the Committee has issued the following agenda decisions:

  • Disclosure of revenue and expenses for reportable segments (July 2024)
  • Climate-related commitments (April 2024)
  • Payments contingent on continued employment during handover periods (April 2024)
  • Merger between a parent and its subsidiary in separate financial statements (January 2024).

Please ensure your 31 December annual and half-year financial statements reflect the conclusions in these agenda decisions. You can find more information about these agenda decisions in our previous articles:

Despite a recent spike in inflation, Australia has experienced low inflation levels for decades, and many entities may need to be aware of special accounting requirements when an entity operates in countries whose economy and functional currency are considered hyperinflationary.

When an entity’s functional currency is ‘hyperinflationary’, AASB 129 Financial reporting in hyperinflationary economies requires the financial statements (including any comparative periods) to be stated in terms of the measuring unit current at the end of the applicable reporting period. This is because the currency of a hyperinflationary economy loses a significant amount of purchasing power from period to period, such that presenting financial information based on historical amounts, even if only a few months old, does not provide relevant information to users of financial statements.

Economies which were considered hyperinflationary as at 31 December 2023

Economies that became hyperinflationary in 2024

Economies that ceased being hyperinflationary in 2024

Economies that have a risk of becoming hyperinflationary (watchlist for 2025 onwards)

  • Argentina
  • Ethiopia
  • Ghana
  • Haiti
  • Islamic Republic of Iran
  • Lebanon
  • Sierra Leone
  • South Sudan
  • Sudan
  • Suriname
  • Turkey
  • Venezuela
  • Zimbabwe
  • Malawi
  • Lao People’s Democratic Republic
  • Yemen
  • Zimbabwe
  • Angola
  • Burundi
  • Egypt
  • Myanmar
  • Nigeria
  • Pakistan
  • Sri Lanka
  • Syria
  • Zimbabwe

You can find more information about financial reporting in hyperinflationary economies in our publication.

Entities preparing Tier 1 general purpose financial statements must disclose the anticipated effect of new and amended standards issued, which are not effective at the reporting date (refer to AASB 108, paragraph 30). These are listed in the table below. Please refer to the resources listed for more information or contact our IFRS & Corporate Reporting team for assistance.

Standard number

Topic

BDO resources

Effective for annual periods commencing

All entities 

AASB 18

Presentation and disclosure in financial statements

Publication

1 January 2027

AASB 2024-2

Classification and measurement of financial instruments, including:

  • The appropriate date for derecognising financial assets and liabilities
  • Application guidance to clarify the ‘SPPI test’

Do financial assets with ESG-linked features meet the SPPI test?  

When is the appropriate time to derecognise trade receivables and payables settled via electronic bank transfers?

Bulletin

1 January 2026

AASB 2023-5

Lack of exchangeability

How to determine the exchange rate when a currency is not exchangeable into another currency

1 January 2025

AASB 2024-3

Annual improvements Volume 11

-

1 January 2026

Public sector entities only

AASB 2022-9

Insurance contracts in the public sector

-

1 January 2026

For years ending 31 December 2024, registrable superannuation entities (RSEs) have annual financial reporting obligations similar to those of listed companies under Chapter 2M of the Corporations Act 2001, though no half-year reporting. These obligations are in addition to their existing obligations to submit quarterly returns to APRA, prepare annual financial statements, have them audited, and lodge them with APRA within three months of the reporting date (i.e. by 31 March 2025).

RSEs must now:

  • Prepare a financial report for each financial year, as well as a remuneration report and directors’ report
  • Have the annual financial report and remuneration report audited and obtain a copy of the auditor’s report
  • Lodge the financial report, the directors’ report and the auditor’s report for each financial year with ASIC
  • Keep relevant records to prepare correct financial reports for at least 7 years (5 years for SIS Act 1993)
  • Make financial reports, directors’ reports and auditor’s reports publicly available on the RSE’s website
  • Include details of how to access an RSE’s financial report, directors’ report and auditor’s report for a financial year with a notice to the annual members’ meeting
  • Provide the financial report, directors’ report and auditor’s reports for a financial year to members upon request.

The following articles provide more information:

For years ending on or after 31 December 2023, entities only need to disclose material accounting policy information. This also applies to Tier 2 entities preparing financial statements using the Simplified Disclosures. Changes to AASB 101 Presentation of Financial Statements mean that the long laundry list of accounting policies, which merely repeat recognition and measurement requirements from the accounting standards, can be removed. 

While these changes applied last year, we noted that many entities did not undertake an exercise to streamline their accounting policies to include only material accounting policy information. Keeping immaterial accounting policies is a big-time waster both for preparers and auditors. Culling unnecessary accounting policies in December 2024 financial reports is a good investment - a little time spent now will deliver time savings in the future and more clarity for users of the financial statements.

Our article  explains what accounting policy information is material and what is not.

More information

Our recent webinar contains further useful tips to help you on your 31 December 2024 reporting journey.

We are here to help

Please contact our IFRS & Corporate Reporting team if you need support with any financial reporting matters for your 31 December 2024 financial reports.