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

When preparing 31 December 2022 annual and half-year financial reports, entities should consider the following:

• No more extensions of reporting deadlines
• No more lodgement relief for large grandfathered proprietary companies
• Transitioning to general purpose financial statements
• AFS licensees
• New standards
• New IFRIC agenda decisions
• New standards issued not effective
• ASIC focus areas   
• Classification of employees and contractors - Employee benefit provisions
• Listed entities
• Russia-Ukraine conflict
• Climate-related matters
• Specific requirements for not-for-profit entities (NFPs).

Please refer to our recent webinar, Getting ready for 31 December 2022 reporting for more information.

No more extensions of reporting deadlines

Entities required to lodge financial reports with the Australian Securities and Investments Commission (ASIC) should note that ASIC is not intending to provide any further blanket extensions of time for listed and unlisted entities required to lodge 31 December 2022 financial reports. Entities wishing to obtain extensions will need to make specific applications for relief to ASIC.

No more lodgement relief for large grandfathered proprietary companies

Large grandfathered proprietary companies with financial years ending on or after 10 August 2022 are no longer exempt from lodging their audited financial statements with ASIC. They must have their Simplified Disclosures GPFS audited, and lodge them with ASIC within four months of year-end (i.e. by 30 April 2023).

Large grandfathered proprietary companies have two additional burdens for 31 December 2022 reporting:

• They must prepare at a minimum, Simplified Disclosures GPFS because they are required by legislation (the Corporations Act 2001) to prepare financial statements in accordance with Australian Accounting Standards
• They lose their lodgement exemption.

Please refer to our previous article for more information.

Transitioning to general purpose financial statements

Certain for-profit entities that have prepared special purpose financial statements (SPFS) in the past cannot avoid transitioning to general purpose financial statements (GPFS) any longer.

For the 31 December 2022 annual reporting period, 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.

LEGISLATION (e.g. Part 2M of Corporations Act 2001)	OR	CONSTITUTIONS/OTHER DOCUMENTS (e.g. trust deeds) CREATED OR AMENDED ON OR AFTER 1 JULY 2021
Australian Accounting Standards or ‘accounting standards’		Australian Accounting Standards

Which entities will be affected?

The following types of entities that previously prepared SPFS will need to prepare GFPS for the 31 December 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 required to prepare 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.

We anticipate that most SPFS can transition to Tier 2 (Simplified Disclosures) because they are unlikely to be ‘publicly accountable’.

Reduced Disclosures have been withdrawn

All entities (for-profit and not-for-profit) that previously prepared GPFS (Reduced Disclosures) must transition to GPFS (Simplified Disclosures) or Tier 1 GPFS for 31 December 2022 because the Reduced Disclosures have now been withdrawn.

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 AASB 108 or AASB 1).

Limitations on rounding

While the usual rounding rules in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 apply to all entities, those with total assets less than $1 billion preparing Simplified Disclosures financial statements are not permitted to round to the nearest thousand dollars for disclosures regarding audit fees, certain share-based payment information, key management personnel, and related party information. These must be rounded to the nearest dollar. They are also only permitted to round certain share-based payment information to the nearest cent. Please refer to our previous article for more specific details.

Are SPFS still permitted?

Entities whose constitutions or other documents or agreements, such as trust deeds, require financial statements to be prepared in accordance with Australian Accounting Standards may continue to prepare SPFS if the constitution, document, or agreement that requires financial statements in accordance with Australian Accounting Standards was created before 1 July 2021, and not amended from 1 July 2021 onwards.

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 ensure 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.

AFS licensees

AFS licensees are required to prepare GPFS for 31 December 2022 because they are required to prepare financial statements in accordance with Australian Accounting Standards under the certification section of Form FS 70.

Our previous article explains the different general purpose reporting requirements for licensees reporting under both Chapter 2M and Chapter 7, and for those reporting only under Chapter 7. In some instances, licensees reporting under Chapter 7 have more onerous financial reporting requirements than when reporting under Chapter 2M. This is because ASIC deems certain types of licensees to have ‘public accountability’ and prepare Tier 1 GPFS for Form FS 70, even though they do not have ‘public accountability’ according to the definition in AASB 1053 Application of Tiers of Australian Accounting Standards.

Transition relief

There is no transitional relief for AFS licensees reporting under Chapter 2M at 31 December 2022. That is, they must prepare Tier 1 GPFS with comparatives at 31 December 2021 if they have ‘public accountability’ according to the definition in AASB 1053, otherwise they must prepare Tier 2 GPFS (Simplified Disclosures), with comparatives.

However, for Chapter 7 reporting purposes, Form FS 70 provides transitional relief for licensees that are not reporting entities, prepared SPFS for 31 December 2021, and do not have ‘publicly accountability’ according to the definition in AASB 1053. Please refer to our previous article for a more detailed discussion on transitional relief available for AFS licensees.

New standards

The main new standards applying for the first time to 31 December 2022 annual and half-year periods are outlined in the table below. Please refer to resources listed for more information or contact our IFRS & Corporate Reporting team for assistance.

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	✔	✔	More relief in AASB 1 for entities transitioning to general purpose Simplified Disclosures financial statements
AASB 2022-4	Amendments to Australian Accounting Standards – Disclosures in Special Purpose Financial Statements of Certain For-Profit Private Sector Entities	Ending 30 June 2022	✔	N/A	More disclosures for for-profit entities preparing special purpose financial statements at 30 June 2022 * *Also applies to for-profit entities continuing to prepare SPFS at 31 December 2022
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	IASB extends practical expedient for COVID-19 rent concessions until 30 June 2022 Leases (IFRS 16/AASB 16)
AASB 2020-3	Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments	Beginning 1 January 2022	✔	✔	Proceeds from selling items before property, plant and equipment is ready for intended use – Deduct off cost or recognise as income? Supply chain disruptions, higher prices, and accounting standard changes – What this means for 31 December 2022 financial statements 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 30 June 2022 half-year reporting period.

New IFRIC agenda decisions

Entities also need to consider whether the IFRIC agenda decisions outlined in the table below, which were approved during the past 12 months, could affect their 31 December 2022 financial statements.

Decision	Resources
Forgiveness of lease payments by lessors	Article
Special purpose acquisition companies – Accounting for warrants at acquisition
Multi-currency groups of insurance contracts	FAQ
Transfer of insurance coverage under a group of annuity contracts	FAQ
Classification of public shares as debt or equity in special purpose acquisition companies	Article
Negative low-emission vehicle credits	Article
Principal versus agent – software reseller	Article
Demand deposits with restrictions on use arising from a contract with a third party	Article
Economic benefits from use of a wind farm	Article

New standards issued not effective

IFRS 17 Insurance Contracts

IFRS 17 will affect insurers from 1 January 2023, but non-insurers should also be aware that it could affect them too. You can find more information about how IFRS 17 could affect non-insurers on our website.

Amendments to IAS 12 Income Taxes

Depending on their current accounting treatments for deferred tax relating to leases and decommissioning obligations, some entities may also be impacted by amendments to IAS 12 Income Taxes, which clarify that the ‘initial recognition exemption’ cannot be used on initial recognition of leases by lessees, or on the initial recognition of asset retirement obligations, which give rise to equal taxable and deductible temporary differences. Our June and July 2021 articles provide examples to illustrate how the amendments will apply in practice.

Classification of liabilities as current or non-current

While only applying from 1 January 2024, amendments to IAS 1 Presentation of Financial Statements could result in the classification of an entity’s liabilities changing and may have implications for meeting loan covenants. Our previous article contains a summary of these amendments.

ASIC focus areas

Consistent with prior years, ASIC will review 31 December 2022 financial reports as part of its financial reporting surveillance program. Its main focus areas will be:

• Uncertainties and risks
• Asset values
• Provisions
• 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 31 December 2022 financial reports.

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 31 December 2022 financial statements.

Please refer to our previous article for more information.

Listed entities

The ASX markets announcements office is open 8:30am to 7:30pm Sydney time (8:30pm during daylight saving) on ASX trading days.

Listed mining and oil and gas entities should also note that revised Listing Rule 5 Additional reporting on mining and oil and gas production and exploration activities came into effect on 1 July 2022. Disclosures about new and updated reserves made after 1 July 2022 must comply with the revised Listing Rule 5, as well as Guidance Note 32 Reporting on Oil & Gas Activities.

Russia-Ukraine conflict

The Russia-Ukraine conflict is resulting in many entities experiencing financial hardship as a result of increased commodity prices, supply chain shortages and more. Our previous article highlights that preparers must consider how sanctions and their related flow-on effects could impact items measured in the financial statements. This includes additional focus on impairment and adequacy of provisions (including for onerous contracts).

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 31 December 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)

There are a few issues for NFPs to consider when preparing 31 December 2022 financial reports.

RDR has been withdrawn

Tier 2 Simplified Disclosures GPFS are not mandated for NFPs. Nevertheless, those that previously prepared GPFS using the Reduced Disclosures need to redraft their Tier 2 GPFS using Simplified Disclosures because the Reduced Disclosures have been withdrawn.

Reporting thresholds

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 threshold	New revenue threshold	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 31 December 2022 annual and half-year financial reports.