- Auditing and reporting for SMEs are on the agenda to ensure these arrangements are proportionate to the size and nature of the business
- Sustainability reporting, climate change and reform to financial reporting are taking the renewed importance
- Confidence and trust in the capital markets and our profession is now more important than ever
We discussed the impacts of the pandemic and the audit quality debate in the first instalment. This second instalment sheds light on focus areas for SMEs, the renewed importance of sustainability reporting, and the big developments in financial reporting standards.
Focus for small and medium entities
After a lengthy wait, the IAASB's work on improving auditing standards for less complex entities is quickly picking up steam. An exposure draft of a new Separate Standard for Audits of Less Complex Entities has been foreshadowed by the IAASB as early as July 2021. CA ANZ has long advocated for improved scalability in the standards and for addressing the challenges faced by smaller firms and regional auditors.
The Australian Accounting Standards Board (AASB) will continue to develop a new reporting framework for not-for-profit (NFP) entities, with public consultation on its plans due later this year and Treasury currently consulting on revised reporting thresholds for small, medium and large charities.
In the meantime, NFP entities already preparing Tier 2 general purpose financial reports can adopt the AASB's Simplified Disclosure Standard. CA ANZ is providing regular input to the reform process and so far the direction of the reforms is in line with the views expressed by more than 500 members in our survey on Reforming the use of special purpose reporting.
In New Zealand, the New Zealand Accounting Standards Board (NZASB) is performing a post-implementation review on simple format reporting standards applied by Tier 3 and Tier 4 NFP and public sector public benefit entities.
The findings of this review will significantly affect the financial reporting obligations for about 93% of the 27,800 registered charities in New Zealand that apply these standards. Furthermore, the financial reporting landscape for other SMEs, such as incorporated societies, may also change once the review of the Incorporated Societies Act 1908 progresses. CA ANZ is actively contributing to the consultation process.
Non-financial reporting including climate risks
Climate and emerging risk are on the top of the agenda for governments, regulators, and investors globally. Considerations around impairment and non-financial reporting risks continuing to grow and affect businesses and capital markets.
To help members navigate this non-financial risk landscape, CA ANZ has produced valuable resources on how Accountants are pivotal in identifying and managing non-financial risk,including a guide to non-financial risks in 2020 which is still applicable in 2021.
The Trustees of the IFRS Foundation have received strong support in a consultation assessing demand for a new global sustainability standards board. The Foundation recently foreshadowed a possible announcement of a new board at the UN Climate Conference in November, COP 26.
CA ANZ's submission on the Consultation Paper on Sustainability Reporting was generally supportive of the concept but emphasised the importance of achieving greater harmonisation in sustainability reporting frameworks and avoiding the risk of just adding one more set of standards to an already complex system of reporting frameworks.
In New Zealand, Cabinet agreed to introduce a mandatory regime seeking to make climate-related financial disclosures mandatory for all publicly listed companies and large financial services organisations.
If approved by the NZ Parliament, financial and other entities covered by the regime may be required to make climate-related financial disclosures in 2023 at the earliest.
The External Reporting Board has the mandate to develop the reporting standards, including industry specific disclosure requirements, with the Financial Markets Authority responsible for independent monitoring, reporting and enforcement.
Financial reporting standards and reforms
Globally, major economies are increasingly adopting digital financial reporting, enabling efficient retrieval of data for internal/external analysis. Various government initiatives now permit entities to lodge financial information in digital form.
The practice is voluntary in Australia, with very little uptake by companies. However, one recommendation from the parliamentary joint inquiry was to make digital financial reporting standard practice.
CA ANZ's recent report on The Future of Financial Reporting, examines the many benefits of digital financial reporting, which include assisting in automating regulatory filings, facilitating business information processing and cost reduction for users of financial reports as they are able to navigate and extract information from financial reports more efficiently.
As the activity on digital financial reporting is expected to pick up in 2021 in response to the parliamentary recommendation, CA ANZ will continue to support the move towards adoption.
CA ANZ's recent 2020 Chartered Accountants IFRS Survey presented valuable findings on the impact of recently implemented accounting standards, what to anticipate from some of the forthcoming standards, and some of the impacts of the pandemic on financial reporting. Seven hundred and fifty-two CA ANZ members and other industry professionals responded to the survey.
The AASB's mending standard AASB 2020-2 removing the ability of certain for-profit entities to lodge special purpose financial statements with regulators and AASB 1060 providing disclosure via a new simplified disclosure standard are applicable this year, and consultations on various new standards and pronouncements are expected, including management commentary, post-implementation reviews and leasing proposals for public sector.
These proposals and new standards require attention from preparers, users and auditors of financial reports. CA ANZ will facilitate input from members to inform submissions on these forthcoming consultations.
If you have any thoughts on any of the topics mentioned, we would like to hear from you!Email us
Reporting and assurance part one
What to look for in reporting and assurance during 2021.Read more