AASB 18 Presentation and Disclosure in Financial Statements has been introduced to enhance the presentation of financial statement as well as for transparency and comparability in reporting a company’s operating results.

This new standard will significantly impact financial reporting for listed companies and other Tier 1 reporters. However, AASB 18 also provides management an opportunity to more closely align how they measure, and view performance compared to how is presented on the face of the statement of profit or loss. 

Why the changes?

Users of financial statements, especially investors, have raised concerns about the usefulness and comparability of  information from financial statements.

Some common issues impacting the quality of information in financial reporting include:  

• lack of clear definitions or guidance on how entities present their operating performance under previous standards
• divergence in practice regarding communication of alternative performance measures, commonly known as Non-IFRS measures or adjusted earnings
• material items being labelled as “other” in financial statements.
• AASB 18 was introduced to provide additional transparency and comparability for users of financial statements.

What are the changes?

There are three major changes under the new requirements:

1. New structure for presentation of profit or loss

The standard mandates that the profit or loss statement be structured into three categories:

• operating
• investing and
• financing.

It also introduces two new required subtotals:

• operating profit and
• profit before financing and income taxes.

AASB18 clarifies the definitions of the operating category and operating profit, ensuring consistency in how the company’s results are presented. There are new requirements for categorising and disclosing expenses, allowing for a more flexible presentation compared to the current binary classification based on function and nature.

2. Disclosure of how management views the performance

Many companies, especially listed entities, choose to report alternative performance measures, also referred to as “non-IFRS”, such as adjusted earnings, EBITDA, or adjusted EBITDA. Some of those measures will become Management-defined Performance Measures (MPMs) and will be subject to the new standard’s disclosure requirements.

If a company reports MPMs in other areas of reporting, such as the directors’ report, it must bring that information into the notes of the financial statements and reconcile it back to the nearest subtotal in the profit or loss statement. The tax and non-controlling interest (NCI) impacts of those reconciliation items must also be disclosed.

Management must explain in the notes the reasons for selecting the MPMs and any changes to these measures. All the MPMs and related disclosures will be subject to audit as they form part of the notes.

3. Grouping and labelling of information

There are enhanced requirements regarding the grouping of information and the disclosure of items labelled “other”. Further guidance is now available on how and when to aggregate or disaggregate information. 

Although AASB 18 primarily impacts the profit or loss statement, the new aggregate and disaggregated requirements may also impact on other areas of the financial statements.

Companies are also now required to present interest and dividends received under ‘investing cash flows’, while payments must be recorded under financing. Previous accounting policy choices regarding such presentations have been removed.

What will be the impact?

The adoption of the new standards is expected to have a major impact across all Tier 1 financial reports. Management will need to consider whether any of its contracts and remuneration, often linked to profit or loss, will be affected. Loan covenants linked to profit or loss may also need to be clarified.

Depending on existing systems and reporting processes, the financial reporting impact ranges from remapping the chart of accounts to requiring changes in systems and processes. For example, properly categorising foreign exchange transactions could be complex.

Companies will need to train internal staff involved in financial reporting and communicate changes to various internal and external stakeholders, as these changes may also impact on budgeting and forecasting tools and reports.

When to take action?

The new standard will be mandatory for the first time on 1 January 2027. For entities with a December year-end, this means it will apply to the year ending 31 December 2027. Comparative information will also be required.

Many listed companies report interim financial reports; AASB 18 will be applicable for any interim reporting starting 1 January 2027. 

Early adoption of the new requirement is permitted by the standard.

What about NFP and Tier 2 reporters?

For Tier 1 not-for-profit entities, the mandatory effective date is 1 January 2028, which is  one year later compared to their for-profit counterparts.

At this stage, AASB 18 does not apply to those preparing financial reports under the Simplified Disclosures Standard, commonly known as “Tier 2”. AASB is currently working on strategies for Tier 2 entities.

How SW can help

Our team of audit and assurance experts are fully informed of the requirements of the new accounting standard and can assist with providing guidance for your business, as well as keeping you abreast of developments from an Australian reporting context.

We can:

• provide additional information and training for staff 
• conduct an impact assessment and provide recommendations.

Reach out to your SW contacts or the key contacts here for a conversation.

Contributor

Jimmy Cao

The post AASB 18: Key changes in presentation of profit & loss of listed entities appeared first on SW Accountants & Advisors.

The ISSB has issued two standards focusing on material risks and opportunities related to sustainability (IFRS S1) and climate (IFRS S2). The new standards are effective for reporting periods beginning on or after 1 January 2024 however, each jurisdiction may choose its own effective date and which entities would be mandated to comply.

In Australia, Treasury received a range of responses to its first consultation paper regarding rollout for mandatory climate disclosure, and the majority of stakeholders agreed that a phased approach should be implemented.

Treasury has now released a second consultation paper, open until 21 July 2023, seeking consultation on several issues such as the timing of the rollout and covered entities, seeking input whether the standards should initially apply to listed entities and what an appropriate entity size would be. Other matters under consultation include what the legislative framework in Australia would be and who entities would be reporting to.

Proposed rollout

Treasury’s proposed roadmap for mandatory adoption can be summarised as follows:

Group 1 | 2024-25

Entities preparing accounts in accordance with the Corporations Act (chapter 2M) and meets at least 2 of the following:

• over 500 employees
• consolidated gross assets of $1 billion or more
• consolidated revenue of $500 million or more.

AND Entities preparing accounts in accordance with the Corporations Act (chapter 2M) that are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.

Group 2 | 2026-27

Entities preparing accounts in accordance with the Corporations Act (chapter 2M) and meets at least 2 of the following:

• over 250 employees
• consolidated gross assets at end of company’s financial year and any controlled entities is $500 million or more
• consolidated revenue for company’s financial year and any controlled entities is $200 million or more.

AND Entities preparing accounts in accordance with the Corporations Act (chapter 2M) that are a ‘controlling corporation’ under the NGER Act and meet the NGER publication threshold.

Group 3 | 2027-28

Entities preparing accounts in accordance with the Corporations Act (chapter 2M) and meets at least 2 of the following:

• over 100 employees
• consolidated gross assets at the end of the company’s financial year and  controlled entities is $25 million or more
• consolidated revenue for the company’s financial and any controlled entities it $50 million or more.

AND Entities preparing accounts in accordance with the Corporations Act (chapter 2M) that are a ‘controlling corporation’ under the NGER Act.

Voluntary reporting disclosure

Whilst currently not mandatory, many organisations will choose to early adopt, particularly if they know their investors or other stakeholders will find the information relevant. This includes entities in industries that are expected to be significantly impacted by climate change and/or sustainability related matters.

SW highly recommends that entities consider the adequacy of systems and processes to capture sustainability and climate related information.

How SW can help

Our team of audit and assurance experts are fully informed of the requirements of the sustainability accounting standards and can assist with providing guidance for your business, as well as keeping you abreast of developments from an Australian reporting context.

Reach out to our key contacts here for a conversation.

Contributors

James Serpell

The post Sustainability Accounting Standards issued appeared first on SW Accountants & Advisors.

ATO reporting obligations

The Australian Taxation Office (ATO) have reporting obligations in place, affecting employers who issue shares or share options to their employees.  The deadlines to comply with the reporting requirements are:

• ESS statements are due to be issued to employees by 14 July 2023
• ATO reports are due for lodgement with ATO by 14 August 2023. 

What do the ATO reporting obligations mean for you?

Please note that for all ESS interests (new and existing) that are subject to deferred taxation with the deferred taxing point on or after 1 July 2022, cessation of employment has been removed as a deferred taxing point.  

Our innovation solution | CTS ESS Toolkit

SW has developed the ‘Complete Tax Solutions Employee Share Scheme’ Toolkit (CTS ESS Toolkit), an ATO-approved and compliant software which enables employers to simplify their online annual employee share scheme reporting obligations.

Using the CTS ESS Toolkit, SW have been successfully working with businesses to meet their ESS lodgement requirements since electronic reporting began. We are one of only a handful of providers to have passed ATO testing and have ATO approval for our specialised software. CTS ESS Toolkit is designed to help you meet the ATO’s ESS reporting requirements.

The table below outlines the types of companies that are most likely to benefit from using the CTS ESS Toolkit.

Introduction of ‘New Division’ into Corporations Act 2001 (Cth)

Please note any offer of ESS interests to employees made under any existing share plans or new plans should consider whether offers will comply with the recently introduced Division 1A of the Corporations Act 2001 (Cth). The ‘New Division’ overhauls the existing ESS regulatory framework for unlisted and listed companies and updates the legislative framework for entities seeking disclosure relief.    

Next steps

Time is limited to make the necessary arrangements to comply with the ESS reporting requirements. The ATO is particularly keen to ensure corporates are compliant and provide timely and accurate reporting.

Now is the time to ensure your business is not left behind and that everything is ready for reporting season. We can provide a fully outsourced service or license our software; whichever you prefer.

If you would like to discuss how to comply with the ATO reporting requirements or learn more about how our ESS Toolkit will help you, please contact either Sam Morris or Justin Batticciotto on the details below.

Contacts

Sam Morris

E smorris@sw-au-com

Justin Batticciotto

E jbatticciotto@sw-au.com

The post 2023 Employee Share Scheme (ESS) Reporting appeared first on SW Accountants & Advisors.

ATO reporting obligations

The Australian Taxation Office (ATO) have reporting obligations in place, affecting employers who offer shares or share options to their employees. The deadlines to comply with the reporting requirements are:

• ESS statements are due to be issued to employees by 14 July 2022
• ATO reports are due for lodgement with ATO by 14 August 2022 (15 August due to weekend)

What do the ATO reporting obligations mean for you?

Legislation removing the cessation of employment as a taxing point received Royal Assent on 10 February 2022 and will apply to all ESS interests (new and existing) that are subject to deferred taxation, provided the deferred taxing point occurs on or after 1 July 2022. This change will therefore not impact prior year ESS interests or the 2022 lodgements.

Innovation solution

SW has developed compliant software that has been approved by the ATO to enable employers to simplify their online annual employee share scheme reporting obligations.

We have developed the ‘Complete Tax Solutions Employee Share Scheme’ Toolkit (CTS ESS Toolkit) which can help you meet the ATO’s ESS reporting requirements. SW is one of only a handful or providers to have passed ATO testing and we have ATO approval for the software. We have been successfully working with businesses to meet their ESS lodgement requirements since electronic reporting began. 

The table below outlines the types of companies that are most likely to benefit from using the CTS ESS Toolkit.

Next steps

Time is limited to make the necessary arrangements to comply with the ESS reporting requirements. The ATO is particularly keen to ensure corporates are compliant and providing timely and accurate reporting.

Now is the time to ensure your business is not left behind and you have everything in place ready for reporting season. We can provide a fully outsourced service or license our software; whichever you prefer.

If you would like to discuss how to comply with the ATO reporting requirements, or learn more about how our ESS Toolkit will help you, please contact either Sam Morris or Justin Batticciotto on the details below.

Contacts

Sam Morris

E smorris@sw-au-com

Justin Batticciotto

E jbatticciotto@sw-au.com

The post 2022 Employee Share Scheme Reporting appeared first on SW Accountants & Advisors.

ATO reporting obligations

The Australian Taxation Office (ATO) have reporting obligations in place, affecting those who offer shares or share options to their employees. The deadlines to comply with the reporting requirements are:

• ESS statements are due to be issued to employees by 14 July 2021
• ATO reports are due for lodgement with ATO by 14 August 2021.

What do the ATO reporting obligations mean for you?

The change to the cessation of employment taxing point announced in the Federal Budget will apply to ESS interests issued on or after 1 July following Royal Assent. Therefore, this change will not impact prior year ESS interests.

Innovation solution

SW has developed compliant software that has been approved by the ATO to enable employers to simplify their online annual employee share scheme reporting obligations.

We have developed the ‘Complete Tax Solutions Employee Share Scheme’ Toolkit (CTS ESS Toolkit) which can help you meet the ATO’s ESS reporting requirements. SW is one of only a handful or providers to have passed ATO testing and we have ATO approval for the software.

The table below outlines the types of companies that are most likely to benefit from using the CTS ESS Toolkit.

Next steps

Time is limited to make the necessary arrangements to comply with the ESS reporting requirements. The ATO is particularly keen to ensure corporates are compliant and providing timely and accurate reporting.

Now is the time to ensure your business is not left behind and you have everything in place ready for reporting season. We can provide a fully outsourced service or license our software; whichever you prefer.

If you would like to discuss how to comply with the ATO reporting requirements, or learn more about how our ESS Toolkit will help you, please contact either Sam Morris or Justin Batticciotto on the details below.

Get in touch

The post 2021 Employee Share Scheme Reporting appeared first on SW Accountants & Advisors.

The Australian Taxation Office (ATO) have reporting obligations in place, affecting those who offer shares or share options to their employees. Employers can no longer lodge their Employee Share Scheme (ESS) reporting with the ATO using paper or by bulk load Excel spreadsheet. Lodgements will only be accepted electronically. The deadlines to comply with the reporting requirements are:

• ESS statements are due to be issued to employees by 14 July 2018
• ATO reports are due for lodgement with ATO by 14 August 2018.

What do the ATO reporting obligations mean for you?

Innovative solution

ShineWing Australia has developed compliant software that has been approved by the ATO to enable employers to simplify their online annual employee share scheme reporting obligations.

We have developed the ‘Complete Tax Solutions Employee Share Scheme’ Toolkit (CTS ESS Toolkit) which can help you meet the ATO’s ESS reporting requirements. ShineWing Australia is one of only a handful or providers to have passed ATO testing and we have ATO approval for the software.

The table below outlines the types of companies that are most likely to benefit from using the CTS ESS Toolkit.

Next steps

Time is limited to make the necessary arrangements to comply with the ESS reporting requirements. The ATO is particularly keen to ensure corporates are compliant and providing timely and accurate reporting.

Now is the time to ensure your business is not left behind and you have everything in place ready for reporting season. We can provide a fully outsourced service or license our software; whichever you prefer.

To download a copy of this update, click here.

If you would like to discuss how to comply with the ATO reporting requirements, or learn more about how our ESS Toolkit will help you, please contact either Sam Morris or Justin Batticciotto on the details below:

Sam Morris

E smorris@sw-au.com

Justin Batticciotto

E jbatticciotto@sw-au.com

The post 2018 Employee Share Scheme Reporting – Are you ready? appeared first on SW Accountants & Advisors.