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Essential Financial Reporting Updates for 2024

financial report
 

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The Australian Securities and Investments Commission (ASIC) announced 30 June 2024 focus areas and expanded program to support financial reporting and audit quality. With the increased focus on compliance and sustainability reporting, the financial reporting update for 30 June 2024 covers the followings:

  • Amendments to AASB 101 on current/non-current classification of loan arrangements

  • The new Consolidated Entity Disclosure Statement

  • Sustainability-related considerations in financial reporting

  • Other reminders for year-end reporting


This article will provide you with highlights of key areas that might impact companies for the 30 June 2024 reporting season, including areas of focus of ASIC, accounting changes from standard setting and other regulatory changes.


Amendments to AASB 101 on current/non-current classification of loan arrangements

The AASB 101 amendments are effective for annual periods beginning on or after 1 January 2024. The amendments are to address how loan arrangements are classified as current/non-current and require new disclosures in relation to covenants. Under the current definition of a non-current liability, entities have an unconditional right to defer payment for more than 12 months. However, the word “unconditional” has been taken out which means the standard purely look at the legal rights balance sheet date even if it is conditional on a covenant in the future.


Also, according to current guidance, the loan is current if entity expect to repay in the next operating cycle. However, the standard is now very clear the expectation criteria in the standard does not apply to loan arrangement.


Furthermore, convertible loan arrangement might be settled in cash or shares. Under current practice, those equity conversion features that may happen in the next 12 months is normally not considered in the current and non-current classification. Now the standard clearly states we do need to consider.


The New Consolidated Entity Disclosure Statement

The amended legislation states that a financial report for a public company consists of (s.295(1), Corporations Act 2001) the financial statements, the notes to the financial statements, the director’s declaration, and the new consolidated entity disclosure statement. All public companies, including those that do not prepare consolidated accounts, must include this statement in their financial report. The statement must list all subsidiaries along with their place of incorporation and tax residency. This change will take effect for the financial year ending 30 June 2024.


The key sustainability considerations in financial reporting

The landscape of sustainability reporting is evolving quickly. In Australia, standard setters and the Government are gearing up for mandatory sustainability reporting based on Australian Sustainability Reporting Standards, which will use IFRS Sustainability Disclosure Standards as a foundation, starting in 2025.


Other reminders for year-end reporting
  • AASB 16 Leases was amended in relation to the accounting for a sale leaseback transaction where the payments are variable.

 

  • The disclosures have been revised to mandate new disclosure requirements about supplier finance arrangements, detailing their impact on an entity’s liabilities, cash flows, and exposure to liquidity risk.

 

  • AASB 121 The Effects of Changes in Foreign Exchange Rates has been amended to address the accounting for transactions or operations in a foreign currency that cannot be exchanged into another currency. This amendment is effective for annual reporting periods beginning on or after 1 January 2025, with the option for early adoption.

 

  • IFRS 18 will be adopted very soon which will be effective for annual reporting periods beginning on or after 1 January 2027. The changes introduce a new defined structure to the profit and loss statement with the objective of achieving comparability. New disclosures will also be required for some management-defined performance measures to enhance transparency.

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