Welcome to our final edition of “Beyond the Numbers” for 2024, our monthly newsletter which brings you a summary of the latest developments from local and international standard setters and regulators.
Nexia Australia wishes all our readers a safe and joyful Christmas and a happy New Year. Beyond The Numbers will be back in February 2025.
Top story
The Senate Legal and Constitutional Affairs Legislation Committee has released its report on the Anti-Money Laundering and Counter-Terrorism Financing Amendment Bill 2024 (the Bill).
The Bill amends the Anti-Money Laundering and Counter-Terrorism Financing regime to expand the list of designated services to include higher-risk services provided by real estate professionals, dealers in precious metals and stones, and professional service providers including accountants, legal practitioners, conveyancers, professional trustees and company secretarial services.
The Committee recommended the Bill be passed, subject to some technical amendments. If passed, the amendments would be effective from 31 March 2026.
The Impact Analysis prepared by the Attorney-General’s Department noted that, if implemented, the estimated total upfront and ongoing annual regulatory cost on the accounting services industry will be $562 million and $245 million, respectively. Such costs are expected to be passed on to consumers.
The Bill is now subject to passage through the Senate.
Local reporting
The Australian Accounting Standards Board (AASB) has deferred the mandatory effective date of AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture through AASB 2024-4, pushing it back to annual reporting periods beginning on or after 1 January 2028.
AASB 2014-10 addresses inconsistencies between AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures regarding the sale or contribution of assets between an investor and its associate or joint venture. It requires:
- Full gain or loss recognition when a transaction involves a business; or
- Partial gain or loss recognition when a transaction involves assets that do not constitute a business.
The deferral allows the International Accounting Standards Board to consider feedback on its Exposure Draft Equity Method of Accounting – IAS 28 Investments in Associates and Joint Ventures which proposes revisions to the equity method of accounting and will affect AASB 2014-10.
The AASB met for its last scheduled meeting for 2024 on 7 November and discussed the following key agenda items:
- Feedback received on the IASB’s ED/2024/6 Climate-related and Other Uncertainties in Financial Statements: Proposed Illustrative Examples.
The Board recommended improvements to the 8 examples the International Accounting Standards Board (IASB) proposed.
- The Board considered initial feedback on the IASB’s draft ED/2024/7 Equity Method of Accounting. following consideration of feedback on the Australian exposure drat, the Board will submit its comments on the IASB ED.
- The Board considered the IPSASB Sustainability Reporting Standard Exposure Drafts and noted the major differences from the requirements of AASB S2.
- The Board decided to undertake a research project to investigate the information needs of users of climate-related financial information of not-for-profit public sector entities.
At its November meeting, the AASB agreed to update AASB 1048 Interpretation of Standards in line with AASB 2021-7 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections and to change the references from AASB 101 to AASB 18 Presentation and Disclosure in Financial Statements.
The updated version of AASB 1048 will be effective on annual reporting periods ending on or after 31 December 2024.
The IASB has proposed amendments aimed at improving the requirements for recognising and measuring provisions on balance sheets. To support IFRS compliance, AASB proposes the same amendments through ED 336 Provisions—Targeted Improvements.
The proposed amendments would clarify how entities assess when to record provisions and how to measure them, such as using a risk-free rate to discount the future expenditure required to settle an obligation.
Comments on the Australian Exposure Draft closes 31 January 2025.
Regulations
The Australian Securities and Investments Commission (ASIC) has outlined its enforcement priorities for 2025, identifying key areas where it will focus its resources to tackle unlawful conduct that threatens consumers, businesses, and the broader economy.
Key enforcement areas include:
- Misconduct exploiting superannuation savings
- Misconduct impacting small businesses and their creditors
- Licensee failures to have adequate cyber-security protections
- Debt management and collection misconduct, and
- Greenwashing and misleading conduct involving ESG claims.
ASIC’s enduring priorities include:
- Insider trading, continuous disclosure breaches and market manipulation
- Misconduct impacting First Nations people
- Misconduct involving a high risk of significant consumer harm
- Systemic compliance failures by large financial institutions, and
- Governance and directors’ duties failures.
ASIC has released findings from its financial reporting and audit surveillance for the 12 months to 30 June 2024, and announced a proactive surveillance focused on auditors’ compliance with independence and conflicts of interest requirements.
Its financial reporting and audit surveillances focused on financial reports which may have a higher risk of misstatements or inadequate disclosure.
Report 799 ASIC’s oversight of financial reporting and audit 2023–24 (REP 799) outlines findings related to disclosure of material business risks in the operating and financial review, impairment of assets, revenue recognition and other financial report disclosures.
ASIC has also written to auditors and CEOs of large audit firms to advise that they are commencing a proactive surveillance focused on compliance with auditor independence and conflicts of interest requirements.
ASIC’s future surveillance efforts will expand to include:
- more large proprietary companies that were previously grandfathered (including audit)
- registrable superannuation entities (including audit)
- climate-related risks
- consolidated entity disclosure statements (CEDS), and
- auditor’s compliance with independence and conflicts of interest requirements.
With new climate-related financial disclosure requirements set to take effect from 1 January 2025 (phased-in over the next 3 years), ASIC is proposing compliance guidance to assist climate-reporting entities.
ASIC’s draft Regulatory Guide 000 Sustainability reporting provides guidance on:
- who must prepare a sustainability report;
- when reporting entities need to prepare a sustainability report and how to comply with related requirements, such as around keeping sustainability records;
- specific issues about the contents of a sustainability report, such as statements with forward-looking climate information, labelling, the use of cross-referencing, and the proportionality mechanisms and exceptions under AASB S2 Climate-related Disclosures;
- how the sustainability reporting requirements interact with existing legal and regulatory requirements; and
- ASIC’s role in administering and enforcing the sustainability reporting requirements, including its approach in granting relief from these requirements and use of its new directions power.
Feedback on the draft guidance is due by 19 December 2024.
The Treasury released an Exposure Draft (ED) on the Treasury Laws Amendment Bill 2024: Enhanced Disclosure of Ownership of Listed Entities.
The consultations relate to proposed amendments to the Corporations Act 2001 which, if passed, would extend the substantial holding notice and tracing regimes relating to ownership interests in listed entities to include equity derivatives (e.g., cash-settled call options), strengthen ASIC powers and potential penalties in the event of breach and make various procedural changes in relation to both aspects.
The consultation period is open until 13 December 2024.
The NSW Treasury issued Treasury Policy and Guidelines TPG24-33 setting out the reporting framework for the minimum content requirements for the first year of mandatory climate-related financial disclosures for government entities, agencies, and departments that will be covered by Phase 1 reporting.
At this point, the NSW Government does not require entities to fully align with Australian Sustainability Reporting Standard (ASRS).
Following its consultation paper last December 2023, the Australian Treasury has announced a two-phase plan to eliminate the use of cheques in the country.
Phase one will involve the discontinuation of cheque issuance by June 2028. In the second phase, businesses and financial institutions will no longer accept cheques after September 2029.
International news
The International Accounting Standards Board (IASB) proposes amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to clarify how companies assess when to record provisions and how to measure them. The amendments would also require companies to provide more information about the measurement of provisions.
The proposed amendments aim to:
- Refine the recognition of a provision by clarifying the tests for when an entity has an obligation (an obligation condition), the nature of the entity’s obligation to transfer an economic resource (the transfer condition), and the past event condition.
- Clarify the costs included in provisions by limiting the inclusion of all direct costs associated with a provision.
- Clarify the application of discount rates by proposing the use of a risk-free rate for long-term provisions, with no adjustment for non-performance risk.
The amendments would also result in the withdrawal of IFRIC Interpretation 6 Liabilities arising from Participating in a Specific Market – Waste Electrical and Electronic Equipment and Interpretation 21 Levies.
Depending on an entity’s existing accounting policies, the IASB’s proposals may result in larger provisions.
The comment period on the IASB exposure draft is open until 12 March 2025.
The IASB met on 19-20 November 2024. The main topic for discussion was its targeted refinements to its proposals for inclusion in an exposure draft of IFRS Practice Statement 1 Management Commentary.
No decisions were made and deliberations will continue at future meetings.
The agenda papers for the IFRS Interpretations Committee meeting held on 26 November 2024 are available on the IFRS website.
The agenda items include, among others:
- Potential recognition of intangible assets resulting from climate-related commitments;
- Exposure Draft Climate-related and Other Uncertainties in the Financial Statements; and
- Statement of cash flows and related matters.
The IFRS Foundation has released a new comprehensive guide to assist organisations in identifying and disclosing material sustainability-related risks and opportunities.
The guide focuses on how these risks and opportunities can arise from a company’s dependencies and impacts on various resources and relationships such as human, intellectual, financial, natural, manufactured and social resources across its value chain.
It also provides practical guidance on using a materiality assessment process, similar to that used for financial reporting, to identify and disclose relevant sustainability information.
The International Sustainability Accounting Standards Board’s (ISSB) 5th webinar, “Perspectives on Sustainability Disclosure,” offers insights into ensuring accurate and reliable sustainability reporting.
Key topics include practical tips for preparing for sustainability disclosure assurance and a comparative analysis of financial and sustainability-related financial information audits, with a focus on GHG emissions.
Previous webinars can be accessed from the ISSB’s Knowledge Hub.
The agenda papers for the ISSB’s Board meeting held on 20-21 November 2024 are available on the IFRS website.
The meeting included discussions on the implementation challenges and opportunities associated with the first two ISSB Standards.
Additionally, the Board reviewed the status of ongoing research projects focused on:
- human capital; and
- biodiversity, ecosystem, and ecosystem services.
These research projects aim to develop future sustainability reporting standards.
The IASB is undertaking a comprehensive review of accounting requirements for intangible assets, aiming to assess the potential need for improvements to IAS 38 Intangible Assets.
The IASB has released two separate surveys – one for investors and another for companies and other stakeholders.
These surveys are open until 30 November 2024.
The survey results are expected to be discussed at an IASB meeting in early 2025.
In case you missed it
The AASB has released two Exposure Drafts to significantly alter the financial reporting framework for NFP entities:
- Exposure Draft ED 334 Limiting the Ability of Not-for-Profit Entities to Prepare Special Purpose Financial Statements; and
- Exposure Draft ED 335 General Purpose Financial Statements – Not-for-Profit Private Sector Tier 3 Entities.
ED 334 proposes to remove the ‘reporting entity’ concept currently applied by many NFP entities and require general purpose financial statements where a NFP is required:
- by legislation to comply with either Australian Accounting Standards or accounting standards; or
- by their constituting document or another document to prepare financial statements that comply with Australian Accounting Standards.
This change would affect large and medium-sized charities registered with the ACNC and many incorporated associations, co-operatives and other NFP entities.
ED 335 proposes a new simplified Tier 3 general purpose financial statements framework for smaller private sector NFP entities. The new framework aims to simplify many of the recognition, measurement, and disclosure requirements compared to both Tier 1 and Tier 2 general purpose financial statements.
NFP stakeholders can get involved by completing an online survey for:
or visit the AASB website.
Both Exposure Drafts are open for public comment until 28 February 2025.
