Recent advice released by ASIC clarifies the financial reporting requirements for AFSL holders for 30 June 2022.  For some AFSL holders, this will mean additional disclosures, and a move to full Tier 1 general purpose reporting, which they may not have been expecting.  A limited number of AFSL holders reporting under Chapter 7 only, have been granted an additional year’s relief.

Summary

A summary of the financial reporting requirements for AFSL holders for 30 June 2022 is as follows:

^{1 if its debt or equity instruments are traded in public market or it is in process of issuing such instruments for trading in a public market and it holds assets in fiduciary capacity for a broad group of outsiders as one of its primary businesses – for example: banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.}

Who is Required to prepare Tier 1 Full General Purpose financial Statements?

AFSL license holders who have public accountability will have to prepare general purpose financial statements with full disclosures (Tier 1).

According to AASB 1053 Application of Tiers of Australian Accounting Standards an entity will have public accountability if its debt or equity instruments are traded in public market or it is in process of issuing such instruments for trading in a public market and it holds assets in fiduciary capacity for a broad group of outsiders as one of its primary businesses – for example: banks, credit unions, insurance companies, securities brokers/dealers, mutual funds and investment banks.

ASIC also requires certain AFSL licensees to prepare a general purpose financial report with full disclosures (Tier 1) even if the license holder does not have public accountability in some instances. This may mean that some AFSL holder who were going to prepare Tier 2 financial statements will now be required to prepare Tier 1. Some of the license holders that are impacted by the requirements of this media release are:

• Corporate advisors that deal in financial products
• Wholesale trustees
• Responsible entities of a registered scheme
• Providers of custodial or depository service
• Operators of an investor directed portfolio service

Please refer to the media release for full list of license holders that are impacted by the new requirements, click here.

Who can still prepare special purpose financial statements? Transitional requirements provide relief for some.

Some AFSL license holders have been given relief from preparation of general purpose financial statements, and can still prepare special purpose financial reports, but only in limited circumstances.  To obtain the transitional relief licensees must:

• have historically elected to prepare special purpose financial reports, and did so for last financial year (FY21), and;
• Directors / Trustees still consider he entity non-reporting for the current reporting period (FY22), and;
• The entity is not required to prepare financial statements under Chapter 2M (for example a Trust) and the entity is reporting under Chapter 7 only

If a licensee meets all the above conditions, then special purpose financials can still be prepared for this year only, which will be welcome relief for some.

Changes to FS70

On 1 July 2022, ASIC also released new format of FS70 form, the significant changes relate to inclusion of financial information for Corporate Directors of Retail CCIV’s under Part 1 of the form and including additional matters relating to preparation of appropriate GPFR – Tier1 or Tier 2 under certification section which needs to be certified by the license holders.

If you would like to discuss reporting requirements or need assistance in preparing financial reports, please reach out to your ESV engagement partner for assistance.

Here is a fact sheet that Chartered Accountants Australia and New Zealand (CA ANZ) and CPA Australia have prepared: click here to view