23RU-11 AFSL financial reporting reminder

AFSL financial reporting

reminder – GPFS

Reporting

update

27 July 2023, 23RU-11

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

Highlights

• Key features ….

• Changes from 2022 financial year

• Appendices

How AFS licensees apply

the Australian financial

reporting framework

What changes from 2022?

ASIC

Form 70

Key features ….

In June 2022 ASIC issued a media release announcing the regulators

requirements for Australian Financial Services (AFS) licensees in implementing

the new Australian financial reporting framework.

The announcement required all AFS licensees to complete a form of general

purpose financial statements (GPFS), that is they can no longer prepare of special

purpose financial statements (SPFS). There was limited transition relief for

financial years commencing before 24 June 2022, for example years ended

30 June 2022.

In respect of 30 June 2023 financial years all AFS licensees must now prepare

GPFS. The transitional relief may impact the disclosures made in the 2022

comparative information disclosed in the 2023 financial statements – see table

below.

ASI

C Form FS 70

(FS 70) is the instrument which gives legal effect of the

changes announced by ASIC. In addition, ASIC has issued some frequently asked

questions which support FS 70. At the date of publishing this Reporting

Update FS 70 has not been updated since September 2022.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

2022 transition relief

Impact on 2023

Issue

Comparative choice

Changes from 2022 financial year

Large or sophisticated

Where an entity reports under Chapter 2M of the Corporations Act 2001 (for

example, a public company or large proprietary company) AND:

• does not have public accountability, AND

• is a type of entity now included on the ASIC list of large or sophisticated

licensees (see Appendix 1

)

then for financial years commencing on or after 1 July 2021 but up to

23 June 2022 an AFS licensee could elect to prepare GPFS-Tier 2 for its current

reporting date (for example, 30 June 2022).

The AFS licensee must however prepare GPFS-Tier 1 for the 2023 financial

year (for example, 30 June 2023).

Where 2022 financial year appropriately applied the relief an issue to consider for

the 2023 financial year financial statements is the impact of the disclosure of

comparatives. Does the AFS licensee update all comparatives to be consistent

with the current year (GPFS-Tier 1)?

Comparatives consideration

The 2023 financial statements will need to be GPFS-Tier 1. In accordance with

AASB 101 Presentation of Financial Statements paragraph 38 requires an entity to

present comparative information in respect of the preceding period for all

amounts reported in the current period – except when permitted by Australian

Accounting Standards (AAS).

The ASIC relief noted above is considered to be part of the Corporations Act 2001

by virtue of it being included in FS 70. However it does not form part of AAS.

As such, a technical issue exists as to whether the 2023 financial statements can

be labelled GPFS – as they have not ‘technically’ complied with the requirements

of AAS (specifically AASB 101.38).

FS 70 does not comment on the above issue. However, if including only some

comparative information results in the financial statements no longer being

‘general purpose’ then how can an AFS licensee comply with the legal

requirement to prepare GPFS?

We understand that ASIC may issue some further guidance on this issue.

AFS licensees therefore have the following choice:

• disclose comparative information for all amounts reported in the current

period, OR

• disclose comparative information only for those amounts which were reported

in the 2022 financial statements (i.e., as indicated in FS 70).

“We would recommend the AFS licensees disclose comparative information

for all amounts reported in the current period. Given the 2022 financial

statements prepared were most likely GPFS-Tier 2 the additional effort

should be minimal.

In addition, ASIC has yet to publish a ‘no action position’.”

Michael Voogt

Director

23RU-11 AFSL financial reporting reminder - GPFS

The information contained in this document is of a general nature and is not intended to address the objectives, financial situation or needs of

any particular individual or entity. It is provided for information purposes only and does not constitute, nor should it be regarded in any manner

whatsoever, as advice and is not intended to influence a person in making a decision, including, if applicable, in relation to any financial

product or an interest in a financial product. Although we endeavour to provide accurate and timely information, there can be no guarantee

that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such

information without appropriate professional advice after a thorough examination of the particular situation.

To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations

in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence,

negligent misstatement or otherwise).

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

Basis of preparation

2022 transition relief

Impact on 2023

Comparative choice

Basis of preparation

If an AFS licensee takes advantage of the limited comparative relief discussed

above – this fact will need to be reflected in the basis of preparation note. Refer

to Appendix 2

for some suggested example wording.

Other – Not report under Chapter 2M

Where an entity does not report under Chapter 2M of the Corporations Act 2001

(for example, a unit trust or small proprietary company) AND:

• appropriately assessed itself as a non-reporting entity at its 2021 reporting

date (for example, 30 June 2021) and elected to prepare SPFS, AND

• it is still considered a non-reporting entity at its 2022 reporting date (for

example, 30 June 2022)

it could elect to prepare SPFS for its current reporting date (for example,

30 June 2022).

The AFS licensee must however prepare GPFS for the 2023 financial year (for

example, 30 June 2023).

Where 2022 financial year appropriately applied the relief an issue to consider for

the 2023 financial year financial statements is the impact of the disclosure of

comparatives. Does the AFS licensee update all comparatives to be consistent

with the current year (GPFS-Tier 1 or GPFS-Tier 2)?

Comparatives consideration

The same issue as discussed above (page 2) applies to AFS licensees

transitioning from SPFS to GPFS for the 2023 financial year.

AFS licensees therefore have the following choice:

• disclose comparative information for all amounts reported in the current

period, OR

• disclose comparative information only for those amounts which were reported

in the 2022 financial statements(i.e., as indicated in FS 70).

“We would recommend the AFS licensees disclose comparative information

for all amounts reported in the current period. We believe that this should

require minimal additional effort given the nature of most AFS licensee

operations that fit into this category.”

Michael Voogt

Director

If an AFS licensee takes advantage of the limited comparative relief discussed

above – this fact will need to be reflected in the basis of preparation note. Refer

to Appendix 2

for some suggested example wording.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

Appendix 1 – Reporting by AFS licensees

Guidance contained in ASIC FS 70

The new framework will apply to AFS licensees which are required to apply Chapter 7 of the Corporations

Act 2001 for financial years beginning on or after 1 July 2021.

Publicly accountable

Those AFS licensees which have public accountability are required to prepare GPSF-Tier 1 (i.e., full

recognition, measurement, classification and disclosure requirements of Australian Accounting Standards).

This should be consistent with the financial reports prepared in previous financial years.

AASB 1053 Application of Tiers of Australian Accounting Standards defines that an entity has public

accountability if:

• 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 (a domestic or foreign stock exchange or an over-the-counter

market, including local and regional markets), or

• it holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses.

In its media release ASIC has confirmed its view that licensees that typically hold client monies or assets

are deemed to be publicly accountable.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

Large or sophisticated

ASIC has introduced a requirement, for those licensees that have a greater market impact (‘large or

sophisticated’), to prepare GPFS-Tier 1. This requirement applies for financial years beginning on or after

1 July 2021, for example years ended 30 June 2022 – subject to the transition relief discussed below.

ASIC has identified the following licensees as being large or sophisticated.

Other AFS licensees

AFS licensees that do not have public accountability nor are ‘large or sophisticated’ will be required to

prepare a form of GPFS – either Tier 1 or Tier 2. They cannot prepare SPFS. This requirement applies for

financial years beginning on or after 1 July 2021 – subject to the transition relief discussed below.

The above applies irrespective of whether the AFS licensee reports under Chapter 2M of the Corporations

Act 2001 or not. Typically a public company or large proprietary company will report under Chapter 2M.

While generally a unit trust (not a managed investment scheme) or small proprietary company does not

report under Chapter 2M.

ASIC has also reinforced that all licensees will be required to prepare a cash flow statement – which is a

requirement for all forms of GPFS.

Transition relief

For 2022 financial years ASIC provided some relief – detailed below. The relief is provided as part of FS 70.

This transitional relief does not apply for financial years beginning on or after 24 June 2022, for

example years ended 30 June 2023.

AFS licensees that are large or sophisticated and report under Chapter 2M

Where an entity reports under Chapter 2M of the Corporations Act 2001 (for example, a public company or

large proprietary company) AND:

• does not have public accountability, AND

• is a type of entity now included on the ASIC list of large or sophisticated licensees

then for financial years commencing on or after 1 July 2021 but up to 23 June 2022 it could elect to

prepare GPFS-Tier 2 for its current reporting date (for example, 30 June 2022). It must prepare GPFS-Tier 1

for the following financial year (for example, 30 June 2023).

For the 2023 financial statements there is an option for limited relief for the presentation of comparative

information where the current year GPFS-Tier 1 comparative disclosures had not been previously made in

the 2022 financial statements. Where the relief is utilised for the 2023 financial year this will need to be

reflected in the basis of preparation note.

In all cases if an entity has public accountability it must prepare GPFS-Tier 1.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

AFS licensees not required to report under Chapter 2M

Where an entity does not report under Chapter 2M of the Corporations Act 2001 (for example, a unit trust

or small proprietary company) AND:

• appropriately assessed itself as a non-reporting entity at its 2021 reporting date (for example, 30 June

2021) and elected to prepare SPFS, AND

• it is still considered a non-reporting entity at its 2022 reporting date (for example, 30 June 2022)

it could elect to prepare SPFS for its current reporting date (for example, 30 June 2022). It must prepare

GPFS for the following financial year (for example, 30 June 2023).

For the 2023 financial statements there is an option for limited relief for the presentation of comparative

information. Comparative information need not contain the new disclosures in the first GPFS prepared

under the new requirements. Where the relief is utilised for the 2023 financial year this will need to be

reflected in the basis of preparation note.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

Consolidated and separate financial statements

The following comments apply were the AFS licensee is a parent.

Prior to the updated FS 70 (1 July 2022), AFS licensees reporting under Chapter 7 of the Corporations Act

2001 were required to provide both consolidated and parent entity financial statements (4 columns) – as the

‘exemption’ to exclude the parent entity financial statements (s295(2)) is not replicated in Chapter 7 for AFS

licensees.

However, intermediate parent AFS licensees, that were not APRA regulated, that qualified for a

consolidation exemption in AASB 10 Consolidated Financial Statements (AASB 10) – either paragraph 4(a) or

Aus4.1 could elect to provide parent entity (separate) financial statements (i.e., not present consolidated

financial statements).

The updated FS 70 (19 September 2022) now includes the following requirement:

11(a)(ii) – if the licensee had ‘control of an investee’ as defined in AASB 10 Consolidated

Financial Statements at any time during the financial year, (it must) include both parent entity

and consolidated financial statements except that an intermediate parent entity need not

present consolidated financial statements where an exemption in AAS applies.

The net impact of the above means that any intermediate parent AFS licensees preparing GPFS:

• that qualify under the consolidation exemption conditions in AASB 10 (either paragraph 4(a) or Aus4.1),

AND

• elect to apply that exemption in their intermediate parent GPFS,

can (continue) to prepare parent entity (separate) financial statements.

Where an intermediate parent does not qualify for the AASB 10 consolidation exemption it will be required

to prepare both parent entity and consolidated GPFS.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

The following summarises the requirements in the updated FS 70:

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

Appendix 2 – Example basis of preparation notes

The following is suggested example wording for a basis of preparation note where an AFS licensee takes

advantage of the limited comparative relief provided in ASIC FS 70 when preparing there 2023 GPFS.

Large or sophisticated

Large or sophisticated AFS licensees are required to prepare GPFS-Tier 1 for the 2023 financial year.

An AFS licensee (large or sophisticated) may have taken advantage in preparing the financial statements for

the 2022 financial year and elected to prepare GPFS-Tier 2 – refer to discussion in ‘

Changes from 2022

financial year’ section above.

This election will have an impact on the 2023 GPFS comparatives. If an AFS licensee takes advantage of

the limited comparative relief this fact will need to be reflected in the basis of preparation note.

The following is example wording that may be used when preparing the basis of preparation note to the

2023 GPFS-Tier 1. The example wording is for a fact pattern where the AFS licensee:

• is a large proprietary company, AND

• is either a single entity (i.e., it has no subsidiaries) or a parent, AND

• appropriately prepared GPFS-Tier 2 for the 2022 financial year, AND

• prepares GPFS-Tier 1 for the 2023 financial year, AND

• elects for the 2023 financial year not to disclose comparative information for the new disclosures in the

first GPFS-Tier 1 prepared under the new requirements.

Should your fact pattern be different from the above the basis of preparation wording will need to be

amended.

Basis of preparation

The [consolidated] financial statements are general purpose financial statements which have

been prepared in accordance with Australian Accounting Standards adopted by the Australian

Accounting Standards Board and the Corporations Act 2001.

These financial statements are the first general purpose financial statements prepared in

accordance with Australian Accounting Standards. In the prior year the financial statements

were general purpose financial statements prepared in accordance with Australian Accounting

Standards – Simplified Disclosures.

The change has:

• no impact on the recognition and measurement of amounts recognised in the statements of

financial position, profit and loss and other comprehensive income and cash flows of the

[Group/Company]

• resulted in an [increase/change] in the level of disclosures in the annual financial report.

The [Group/Company} has elected not to include certain comparative information as permitted

by ASIC Form FS 70 (paragraph 11B). The comparative information not disclosed is identified in

notes [#] to [#]

These [consolidated] financial statements were authorised for issue by the Company’s Board of

Directors on [date].

Details of the [Group’s/Company’s] accounting policies are included in Note X. [Changes to

significant accounting policies are described in Note Y.]

* - AFS licensees will need to include a notation in each respective note.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

IFRS compliance

In accordance with AASB 101 paragraph 16 the AFS licensee will not be able to state that the 2023

financial statements comply with International Financial Reporting Standards adopted by the International

Accounting Standards Board. This results from the fact the not all comparative information has been

disclosed (as discussed above). Disclosure of comparative information in respect of the preceding period

for all amounts reported in the current period’s (2023) financial statements is a requirement of AASB 101

paragraph 38.

Other AFS licensees not required to report under Chapter 2M

AFS licensees not required to report under Chapter 2M are required to prepare either GPFS-Tier 1 or

GPFS-Tier 2 for the 2023 financial year.

An AFS licensee (not required to report under Chapter 2M) may have taken advantage in preparing the

financial statements for the 2022 financial year and elected to prepare SPFS – refer to discussion in

‘Changes from 2022 financial year

’ section above.

This election will have an impact on the 2023 GPFS – 2022 comparative information. If an AFS licensee

takes advantage of the limited comparative relief this fact will need to be reflected in the basis of

preparation note.

The following is example wording that may be used when prepare the basis of preparation note to the

2023 financial statements. The example wording is for a fact pattern where the AFS licensee (not required

to report under Chapter 2M):

• is a small proprietary company, AND

• is a single entity (i.e., it has no subsidiaries), AND

• appropriately prepared SPFS for the 2022 financial year, AND

• the 2022 SPFS complied with all the recognition and measurement requirements in AAS, AND

• elects to prepare GPFS-Tier 2 for the 2023 financial year, AND

• elects for the 2023 financial year not to disclose comparative information for the new disclosures in the

first GPFS prepared under the new requirements.

Should your fact pattern be different from the above the basis of preparation wording will need to be

amended.

Basis of preparation

In the opinion of the directors, the Company is not publicly accountable. These financial

statements are general purpose financial statements for distribution to the members. They

have been prepared in accordance with Australian Accounting Standards – Simplified

Disclosures made by the Australian Accounting Standards Board.

These financial statements are the first general purpose financial statements prepared in

accordance with Australian Accounting Standards – Simplified Disclosures. In the prior year the

financial statements were special purpose financial statements as the Company assessed itself

as a non-reporting entity.

The Company has adopted AASB 1060 General Purpose Financial Statements – Simplified

Disclosures for For-Profit and Not-for-Profit Tier 2 Entities on [1 July 2022] which resulted in an

[increase/change] in the level of disclosures. The change has no impact on the recognition and

measurement of amounts recognised in the statements of financial position, profit and loss and

other comprehensive income and cash flows of the Company.

23RU-11 AFSL financial reporting reminder - GPFS

used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under

Professional Standards Legislation.

The Company has elected not to include certain comparative information as permitted by ASIC

Form FS 70 (paragraph 11B). The comparative information not disclosed is identified in notes

[#] to [#]

These financial statements were authorised for issue by the Company’s Board of Directors on

[date].

Details of the Company’s accounting policies are included in Note X. [Changes to significant

accounting policies are described in Note Y.]

^ - AFS licensees will need to include a notation in each respective note.