The Australian Securities and Investments Commission (ASIC) today announced amendments to some class orders that provide relief from the financial reporting requirements in Chapter 2M of the Corporations Act 2001. The changes apply for financial years ended 30 June 2004.
Class Order [CO 99/1225] Financial reporting requirements for benefit fund friendly societies (variation instrument 04/0664)
This Class Order relieves benefit fund friendly societies registered under the Life Insurance Act 1995 (the Act) from certain financial reporting requirements of Chapter 2M, on condition of compliance with the requirements of APRA Prudential Rules No 47 ‘Friendly Society Financial Statements (s.82(5))’ under the Act (PR 47).
Under PR 47, separate financial statements are required to be prepared for the management fund and each benefit fund of a benefit fund friendly society. The order provides certain conditional relief from distributing the financial statements of all benefit funds to all members.
The Class Order has now been extended to years commencing on or before 31 December 2004. A minor change has also been made to accommodate a recent change to accounting standards. PR 47 was updated earlier this year for recent changes in accounting standards.
The Australian Accounting Standards Board has issued a revised AASB 1038 ‘Life Insurance Business’, which will apply for years commencing 1 January 2005 onwards. It specifically applies to benefit fund friendly societies. Accordingly, ASIC does not intend to extend the relief beyond years commencing 31 December 2004.
Class Order [CO 98/0110] ADIs – related party balances and transactions (variation instrument 04/0665)
This Class Order relieves ADIs (i.e. Authorised Deposit-Taking Institutions, such as banks, building societies and credit unions), their parent entities and controlled entities from certain requirements of accounting standard AASB 1017 ‘Related Party Disclosures’ to disclose certain regularly made, arm’s length balances and transactions between the ADI and persons other than directors.
It has been updated to provide relief from certain disclosure requirements of AASB 1046 ‘Director and Executive Disclosures by Disclosing Entities’ as far as they apply to certain arm’s length transactions and balances. The revised relief does not provide relief from the disclosure of balances and transactions involving an ADI and directors, specified executives, or the entities they control or significantly influence.
Class Order [CO 98/0107] NSW workers compensation statutory funds (variation instrument 04/0666)
This Class Order relieves general insurers from any requirement to consolidate New South Wales workers compensation statutory funds or to include their assets, liabilities and results in their single entity Statement of Financial Performance, Statement of Financial Position etc.
The order has been amended to make relief available only for financial years commencing on or before 31 December 2004. ASIC does not intend to extend the relief to years commencing on or after 1 January 2005, when the Australian equivalents of International Financial Reporting Standards (IFRS) will apply.
Under the NSW Workers Compensation Act 1987, it appears that general insurers do not control the NSW workers compensation funds that they manage and so consolidation is not required. Similarly, general insurers do not appear to control the underlying assets of the funds, which are held on trust and these assets should not be recognised in their own Statements of Financial Performance.
Even assuming consolidation or recognition of the underlying assets and liabilities of a fund were required, continued relief would not be consistent with the Financial Reporting Council’s objective of convergence with IFRS.
For years commencing 1 January 2005, general insurers will need to determine whether to consolidate any NSW workers compensation statutory funds by reference to the accounting standards that are in place at the time.
The class order has also been updated for the recent replacement of an accounting standard.
Class Order [CO 98/0100] Rounding in financial reports and directors' reports (variation instrument 04/0667)
This Class Order permits the rounding of amounts in financial reports and directors’ reports. The level of rounding allowed is based on the level of an entity’s total assets (e.g. generally entities with assets in excess of $10 billion can round to the nearest $1 million). However, the Class Order specifically requires a lower level of rounding for certain disclosures required by accounting standards and the Corporations Act, including the director and executive remuneration disclosures, which can be rounded no further than the nearest dollar (or $1,000 for entities with assets of more than $1 billion).
The Class Order has been updated for AASB 1046 and other recent changes in accounting standards. The permitted extent of rounding for entities of particular sizes and for particular types of disclosures remains unchanged.
Copies of the class order amendments are available from the ASIC website (www.asic.gov.au).
End of release
On the website of the Australian Prudential Regulation Authority, APRA Prudential Rules