VALUE ACCOUNTS Holdings Limited - PwC

VALUE ACCOUNTS Holdings Limited

Annual financial reporting

2020

.au

This publication presents the sample annual financial report of a fictitious public company, VALUE ACCOUNTS Holdings Limited. It illustrates the financial reporting requirements that would apply to such a company under Australian Accounting Standards on issue at 30 September 2020. Supporting commentary is also provided. For the purposes of this publication, VALUE ACCOUNTS Holdings Limited is listed on the Australian Securities Exchange and is the parent entity in a consolidated entity.

Reporting requirements include:

? Australian Accounting Standards ? Interpretations issued by the Australian Accounting Standards Board (AASB) and the Urgent Issues

Group (UIG) ? Corporations Act 2001 ? Australian Securities & Investments Commission releases ? Listing Rules of the Australian Securities Exchange

VALUE ACCOUNTS Holdings Limited 2020 is for illustrative purposes only and should be used in conjunction with the relevant legislation, standards and other reporting pronouncements.

Disclaimer

This publication has been prepared for general reference only and does not constitute professional advice. It is not intended to be and is not comprehensive in relation to its subject matter. This publication is not intended to cover all aspects of Australian Accounting Standards, or to be used as a substitute for reading any relevant accounting standard, professional pronouncement or guidance, legislation (including the Corporations Act 2001 (Cth)) or any other relevant material. Specific company structure, facts and circumstances will have a material impact on the preparation and content of financial reports. No person should undertake or refrain from undertaking any action based on this publication or otherwise rely on this publication. Any use or reliance on this publication is at a person's own risk. This publication should not be used as a substitute for consultation with a professional adviser with knowledge of information relevant to your particular circumstances. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. To the extent permitted by law, PwC and its partners, members, employees and agents do not accept or assume any liability, responsibility or duty of care to anyone for any use of or reliance on this publication. Any references in this publication to PwC providing, or agreeing to provide, any services to any entity are illustrative only and are not intended to reflect or summarise the terms of actual arrangements in respect of any particular parties or the provision of services to them. Accordingly, users of this publication should not rely on such references as reflecting or summarising actual terms. Legal advice should be obtained as to whether any particular arrangements are required to be disclosed, and as to the form and context of any disclosure. This disclaimer applies to the maximum extent permitted by law and, without limitation, to liability arising in negligence or under statute. Liability is limited by a scheme approved under Professional Standards Legislation.

? 2020 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers ("PwC") refers to the Australian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see structure for further details.

Foreword

In times of uncertainty companies will need to draw the investors' focus on key assumptions, estimates and the sensitivity of valuations in the financial report. Preparers will need to find the appropriate way to tell the impact of COVID-19 on their business and to what extent the future uncertainty has been considered. Impairment of assets including receivables, information about going concern and borrowing profiles will receive particular focus. As each entity's impacts will differ we have not attempted to illustrate such disclosures. Instead we encourage you to look at industry peers and overseas peers from the June 20 reporting season. Also have a look at our dedicated COVID-19 website which provides many useful resources, and which is regularly updated to reflect recent developments. The website also provides guidance on the amendments made to AASB 16 Leases for COVID-19-related rent concessions in June 2020. The main changes made to the publication this year were:

? removing the transitional leasing disclosures ? improving the audit remuneration disclosures to reflect recommendations made by ASIC, and ? reflecting in Appendix H interest rate benchmark reform related disclosures. The AASB approved in March 2020 a standard that will remove the ability of for-profit private sector entities to lodge special purpose financial statements (SPFS) with ASIC for financial years beginning on or after 1 July 2021. Appendix A explains these changes. A new publication in our VALUE ACCOUNTS series, VALUE ACCOUNTS Simplified Disclosure Pty Ltd, illustrates the requirements of the new simplified disclosure standard AASB 1060 General Purpose Financial Statements - Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities. This standard will replace the current reduced disclosure regime from 1 July 2021 and can be adopted early.

Feedback We welcome your feedback on the VALUE ACCOUNTS Holdings Limited format and content. Please contact us at IFRS Communications or speak to your usual PwC representative to let us know your thoughts.

Regina Fikkers PwC Australia October 2020

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VALUE ACCOUNTS Holdings Limited

Annual financial reporting December 2020

Director's Report

Financial statements

Statement of profit or loss Statement of comprehensive income Balance sheet Statement of changes in equity Statement of cash flows

Notes to the financial statements

Significant changes in the current reporting period

How numbers are calculated

Segment information Profit and loss Balance sheet Cash flows

Risk

Critical estimates, judgements and errors Financial risk management Capital management

Group structure

Business combination Discontinued operation Interests in other entities

Unrecognised items

Contingent liabilities and contingent assets Commitments Events occurring after the reporting period

Further details

Related party transactions Share-based payments Remuneration of auditors Earnings per share Offsetting financial assets and financial liabilities Assets pledged as security Deed of cross guarantee Parent entity information Accounting policies Changes in accounting policies

Directors' declaration, Independent auditor's report, Shareholder information

Appendices

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46

50 51 58 62 65

68

70

72

73 78 95 156

159

160 163 183

187

188 191 194

201

202 203 203

207

208 213 218 220 223 225 226 229 233 252

253

259

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Introduction

This publication presents an illustrative annual financial report for a fictitious listed company, VALUE ACCOUNTS Holdings Limited. The report complies with the Australian Corporations Act 2001 and authoritative pronouncements on issue at 30 September 2020 that are operative for 31 December 2020 reports.

We have attempted to create a realistic set of general purpose financial statements for VALUE ACCOUNTS Holdings Limited, a corporate entity that manufactures goods, provides services and holds investment property. The amounts disclosed in this publication are purely for illustrative purposes and may not be consistent throughout the publication.

VALUE structure and materiality

Our VALUE ACCOUNTS Holdings publication provides practical solutions to help make your own financial reports less complex and more accessible. The structure used will provide you with possible ideas, but there's no "one size fits all" approach. We recommend you engage with stakeholders who use your financial reports to determine what's most relevant to them.

This publication is a reference tool, so we've included illustrative disclosures for as many common scenarios as possible rather than removing disclosures based on materiality. However, too much immaterial information can obscure the information that is actually useful to readers so consider carefully what to include and exclude: this should be based on what will help your own investors in their decision making.

New disclosure requirements and changes in accounting policies

There were only a few revisions to the financial reporting requirements that became applicable this year, and none of them had any impact on the disclosures. Our fact pattern further assumes that VALUE ACCOUNTS Holdings Limited will not be affected by the interest rate benchmark reforms. However, entities with significant hedging relationships will need to explain the changes to their accounting policies and provide the new disclosures arising from the adoption of the amendments made to AASB 9 Financial Instruments or AASB 139 Financial Instruments: Recognition and Measurement and AASB 7 Financial Instruments: Disclosures. This includes entities that have exposure to interest rates where (i) the interest rates are dependent on interbank offered rates (IBORs), and (ii) these IBORs are subject to interest rate benchmark reforms. The new disclosures are illustrated in Appendix H.

In addition, we have

? added comparative information to the leasing disclosures that were new last year and removed transitional disclosures that are now no longer required (see note 8(b), note 7(g) and note 18)

? revised the audit remuneration disclosures to reflect draft recommendations made by ASIC (see note 2X)

? made other improvements to existing disclosures, and

? replaced references to the conceptual framework with those to the AASB's revised Conceptual Framework for Financial Reporting.

The other amendments to standards that apply from 1 January 2020 and that are unrelated to the adoption of AASB 16 are primarily clarifications, see Appendix G. We have assumed that none of them required a change in VALUE ACCOUNTS Holding Limited's accounting policies. However, this assumption will not necessarily apply to all entities. Where there has been a change in policy that has a material impact on the reported amounts, this would also need to be appropriately disclosed.

Early adoption of standards

VALUE ACCOUNTS Holdings Limited generally only adopts standards early if they clarify existing practice, such as the amendments made by the AASB as part of the improvements programme, but do not introduce substantive changes. As explained above, guidance on the May 2020 amendments to lease accounting for COVID-19-related rent concessions is provided on our dedicated COVID-19 web site. Entities that are lessees and have been granted such concessions may wish to early adopt this amendment since it provides operational relief.

As required under Australian Accounting Standards, the impacts of standards and interpretations that have not been early adopted and that are expected to have a material effect on the entity are disclosed in accounting policy note 25(a). A summary of all pronouncements relevant for annual reporting periods ending on or after 31 December 2020 is included in Appendix G. For updates after the cut-off date for our publication please see our IFRS Reporting Essentials page .au/assurance/ifrs/reporting-essentials.

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