Financial reporting periods ending on or after 30 June 2019

Australian financial reporting guide Financial reporting periods ending on or after 30 June 2019

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Australian financial reporting guide | Table of contents

Table of contents

1 Introduction

2

2 About this guide

3

3 Types and classifications of entities

6

4 Reporting mandate

14

5 The Australian differential reporting framework

49

6 Preparation of annual financial reports

61

7 Other financial reporting considerations

109

8 What's new in financial reporting?

129

9 Using the illustrative financial statements

155

10 Illustrative disclosures

169

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Australian financial reporting guide | Introduction

1 Introduction

Financial reporting for 30 June 2019 continues the major transition period for the new standards on revenue, financial instruments and leases

Full year financial reports for 30 June 2019 must ensure that the new requirements in AASB 9 Financial Instruments and AASB 15 Revenue from Contracts from Customers are fully considered and reflected in a way that reflects the technical requirements of these standards and the entity's specific circumstances.

Similarly, half-year financial reports at 30 June 2019 will see the first mandatory application of AASB 16 Leases, which will represent a major change for many entities, with operating leases brought `on balance sheet' by lessees. Full-year financial reports should also be providing adequate disclosure on the likely impact of AASB 16 in future periods.

The disclosures required by all the new standards are comprehensive and wide ranging. Providing relevant information, while balancing materiality and these detailed disclosures can be a significant challenge. The critical focus should be on:

Ensuring the relevant transitional requirements have been considered and key decisions and judgements communicated in an easy to understand and relevant manner

Revising accounting policies (including in half-year reports) to communicate the impacts of the new standards in a way that clearly articulates the specific policies adopted, in the context of the entity's business. For instance, for AASB 15, revenue streams should be able to be understood in the context of the entity's segment reporting, business operations and other communications

Including only disclosures where they are relevant, discuss material matters and contribute to user's understanding of the entity's financial performance and financial position. In doing so, entities should consider the risks the entity faces, the nature of critical judgements and estimates made, and how the entity's business model results in the accounting outcomes reflected in the financial report

Ensuring the impacts of the new standards have been reflected throughout the financial report, and are consistent with other disclosures made in the financial statements and broader annual report.

This guide and the model financial statements provide comprehensive examples of the disclosures required in relation to the new standards.

In addition, the past 12 months has seen increasing calls for more disclosure of the financial reporting impact of climate-related and other emerging risks, with both the Australian Securities and Investments Commission and Australian Accounting Standards Board encouraging disclosure. Entities need to consider carefully how they will respond to these calls to ensure investor and regulatory expectations are met.

"Investors, regulators and users in general are seeking clear, concise and specific information about the impacts of new standards, together with disclosure on broader topics such as climate-related and other emerging risks"

Alison White National Leader Accounting Technical

June 2019

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Australian financial reporting guide | About this guide

2 About this guide

This financial reporting guide is designed to allow you to understand and efficiently meet your financial reporting obligations

2.1 How to use this guide This guide is designed to be used in conjunction with the Deloitte model financial statements. Set out below is a summary of how to use this guide

Step 1. Categorise the entity Australian financial reporting requirements are driven by the type of the entity. This guide is predominantly focused on entities reporting under the Corporations Act 2001, which defines various categories of entities, their reporting requirements and their reporting deadlines. More guidance is available in Section 3 Types and classifications of entities.

Step 2. Understand the reporting mandate In addition to the core requirements of the Corporations Act 2001, some entities have additional reporting considerations arising under other mandates such as the `general purpose financial statements' requirement arising under the Tax Administration Act 1953, constitution requirements, agreements or funding arrangements. More information is available in Section 4 Reporting mandate.

Step 3. Determine which type of financial statements should be prepared Australia's reporting framework relies on two core considerations: The reporting entity concept which primarily determines whether an entity prepares general purpose

financial statements or special purpose financial statements The differential reporting framework arising under Australian Accounting Standards, which introduces

different types of general purpose financial reports More information can be found in Section 5 The Australian differential reporting framework.

Step 4: Understand the key requirements for financial statements The layout and composition of the financial statements and notes are governed by various factors, including the Corporations Act 2001, Accounting Standards and other regulations. More information can be found in Section 6 Preparation of annual financial reports.

Step 5. Other financial reporting considerations Having prepared the key financial report, entities may need to consider other reporting obligations including continuous disclosure, half-year reporting, concise financial reports and relevant financial reporting. More information on these topics is in Section 7 Other financial reporting considerations .

Step 6. Ensure any new and changed requirements are considered Financial reporting requirements change rapidly, from minor and major amendments to core accounting requirements to regulatory changes, other legislative changes and global trends which should be considered. More information can be found in Section 8 What's new in financial reporting?

Step 7. Access the relevant model financial statements Based on the analysis performed, obtain the relevant model financial statements. Guidance on choosing the version of the model financial statements to use can be found in Section 9 Using the illustrative financial statements.

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Australian financial reporting guide | About this guide

Requirements and illustrative disclosures in this guide which are not applicable to `Tier 2' general purpose financial statements have been shaded in grey.

2.2 Purpose We have developed this Australian financial reporting guide (guide) to assist you meet the general financial reporting requirements applying to the majority of entities reporting under the Corporations Act 2001. It is developed to be used in conjunction with our model financial reports including:

Deloitte International GAAP Holdings model financial statements for the year ended 31 December 2018 (Deloitte model financial statements),

Model half-year report - Half-years ending on or after 31 December 2018 Model special purpose annual report - Reporting periods ending on or after 31 December 2018.

2.3 Effective date This guide includes reporting obligations and illustrative disclosures that are effective for financial years and half-years ending on 30 June 2019.

Unless otherwise noted, the information in this guide has been updated for developments to 17 June 2019.

2.4 Abbreviations The following abbreviations are used in this guide:

Abbreviation

Description

AASB

Australian Accounting Standards Board

Accounting Standards

Australian Accounting Standards issued by the Australian Accounting Standards Board

ASA

Australian Auditing Standard issued by the Auditing and Assurance Standards Board

ASIC

Australian Securities & Investments Commission

ASIC-CO/ ASIC-CI

Australian Securities and Investments Commission Class Order/Corporations Instrument issued pursuant to s.341(1) of the Corporations Act 2001

ASIC-RG

Australian Securities and Investments Commission Regulatory Guide

ASX

Australian Securities Exchange

ASX-LR

Australian Securities Exchange Limited Listing Rule

ASX-GN

Australian Securities Exchange Limited Guidance Note

ATO

Australian Tax Office

Corporations Act

The Corporations Act 2001

Deloitte model half-year report

Deloitte Model half-year report -Half-years ending on or after 31 December 2018

Deloitte model IFRS financial Deloitte International GAAP Holdings Limited model financial statements for the year ended

statements

31 December 2018

Deloitte model MIS report Deloitte Model managed investment scheme annual report for the year ending 30 June 2019

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Australian financial reporting guide | About this guide

Abbreviation Deloitte model financial reports

Deloitte model SPFS GPFS IASB IFRS/s Int ITAA 1997 s. SPFS Tax Administration Act RDR Reg

Description

Collectively: Deloitte International GAAP Holdings Limited model financial statements for the year

ended 31 December 2018 Deloitte Model special purpose annual report - Reporting periods ending on 31 December

2018 Deloitte Model half-year report - Half-years ending on 31 December 2018 Deloitte Model managed investment scheme annual report for the year ending 30 June

2019 Deloitte Illustrative AASB 1056 Financial Report for Superannuation Entities for the

financial year ended 30 June 2018

Deloitte Model special purpose annual report - Reporting periods ending on 31 December 2018

General purpose financial statements

International Accounting Standards Board

International Financial Reporting Standard/s

Interpretation issued by the Australian Accounting Standards Board

Income Tax Assessment Act 1997

Section of the Corporations Act 2001

Special purpose financial statements

Tax Administration Act 1953

Reduced Disclosure Requirements

Regulation of the Corporations Regulations 2001

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Australian financial reporting guide | Types and classifications of entities

3 Types and classifications of entities

The different types and classifications of entities defined in and governed by the Corporations Act influences for example whether or not the entity is required to prepare a financial report under the Corporations Act and if so whether or not it has to be audited and lodged with ASIC.

This section provides a high-level overview of the following types and classifications of entities:

Topic 3.1 Companies

3.2 Not-for-profit entities 3.3 Other types of entities

What is covered

Information about the various types of companies that can be registered under the Corporations Act, and details of the classification of proprietary companies and companies limited by guarantee, and requirements for foreign companies

A high-level overview of the registration and reporting by not-for-profit entities

Other types of entities due to the requirements of the Corporations Act or other requirements, which are relevant for financial reporting purposes, including disclosing entities, registered schemes, crowd-source funded entities, passport funds, stapled entities and Australian Financial Services Licence (AFSL) holders

3.1 Companies 3.1.1 Types of companies The following types of companies can be registered under the Corporations Act (s.112(1)):

Type of company

Public

Proprietary

companies* companies

Limited by shares A company formed on the principle of having the liability of its members limited to the amount (if any) unpaid on the shares respectively held by them (s.9).

Limited by guarantee

-

A company formed on the principle of having the liability of its members limited to the

amounts that the members undertake to contribute to the property of the company if it

is wound up (s.9).

Unlimited with share capital A company whose members have no limit placed on their liability (s.9) and which is incorporated with a share capital.

No liability company

-

A company may only register as a no liability company if:

The company has a share capital

The company's constitution states that its sole objects are mining purposes (as

defined in s.9 of the Corporations Act)

The company has no contractual right under its constitution to recover calls made

on its shares from a shareholder who fails to pay them (s.112(2)).

* A public company is a company other than a proprietary company and can be listed or unlisted.

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Australian financial reporting guide | Types and classifications of entities

3.1.2 Proprietary companies Companies registered under the Corporations Act as proprietary companies must:

Be limited by shares or an unlimited company with share capital, which means that companies limited by guarantee and no liability companies cannot be proprietary companies

Not have more than 50 non-employee shareholders, although shareholders connected with `CSF offers' (i.e. crowdsourced funding) do not count for this purpose

Except in limited circumstances, not do anything that would require disclosure to investors under Chapter 6D of the Corporations Act, i.e. the fundraising provisions of the Act. However, a proprietary company is permitted to raise funds using a `CSF offer' (i.e. using crowd-source funding) so long as it meets the necessary requirements of the Corporations Act for such offers (see section 3.3.2).

Classification of proprietary companies prior to 1 July 2019 The Corporations Act classifies a proprietary company as either a large proprietary company or a small proprietary company. A proprietary company is a large proprietary company or a small proprietary company for a financial year if it satisfies at least two of the conditions noted for Large or Small below respectively:

Condition

Consolidated revenue for the financial year of the company and the entities it controls (if any)

Value of the consolidated gross assets at the end of the financial year of the company and the entities it controls

Number of employees of the company and the entities it controls at the end of the financial year

Value ? Large $25 million or more

Value - Small Less than $25 million

$12.5 million or more Less than $12.5 million

50 or more

Less than 50

Changes to the thresholds applying to future financial years The definition of a large proprietary company and small proprietary company in s.45A(3) and s.45A(2) respectively of the Corporations Act notes that the amounts specified in these definitions may be varied by the Regulations.

The Corporations Amendment (Proprietary Company Thresholds) Regulations 2019 were made in April 2019 and operate to amend the thresholds with effect from 1 July 2019. The application of these amendments is stated as applying in relation to the 2019-20 financial year and later financial years.

Accordingly, the amended thresholds will apply to financial years beginning on or after 1 July 2019. An entity will be classified as a large proprietary company or small proprietary company for a financial year if it satisfies at least two of the conditions noted for Large or Small below respectively:

Condition

Consolidated revenue for the financial year of the company and the entities it controls (if any)

Value of the consolidated gross assets at the end of the financial year of the company and the entities it controls

Number of employees of the company and the entities it controls at the end of the financial year

Value ? Large $50 million or more $25 million or more

100 or more

Value - Small Less than $50 million Less than $25 million

Less than 100

Determining amounts for the purposes of classification Section 45A of the Corporations Act requires that when counting employees, part-time employees be taken into account as an appropriate fraction of a full-time equivalent. Consolidated revenue and the value of consolidated gross assets are calculated in accordance with the accounting treatment specified by Accounting Standards in force at the relevant time (even if the standards do not otherwise apply to the company).

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