We are pleased to present the May 2025 edition of the Accru Financial Reporting Update, in this edition we will look at:
- New requirements for 30 June 2025 reporting entities
- An update on the AASB Tier 3 proposals for NFP entities
- Why mandatory climate reporting requirements may affect you even though you are below the thresholds
- Key considerations around going concern
New requirements for 30 June 2025
As discussed in the November / December edition of this newsletter, there’s not a significant number of new standards in place for the current reporting period. The list of new standards for 30 June 2025 is the same as the list included in the previous newsletter. You can view the examples of scenarios relating to current / non-current classification of liabilities in the previous newsletter.
We have reproduced the list of new standards and the likely level of impact and have focussed on the new disclosure requirements in the revised AASB 101 Presentation of Financial Statements relating to classification of liabilities as current or non-current.
| New Standards | Likely level of impact |
| AASB 101 Presentation of Financial Statements– current / non-current classification of liabilities | Some entities may change the classification of long-term loans between current and non-current. See discussion below the table for new disclosure requirements. |
| AASB 2022-5 Amendments to Australian Accounting Standards – Lease Liability in a Sale and Leaseback | May affect reported numbers on sale and leaseback. Refer to the information in the contemporary issue section of this newsletter relating to sale and leaseback transactions. |
| AASB 2023-1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements (AASB 2024-1 is Tier 2 version) | These clarifications are unlikely to require significant changes for NFP public sector entities; however, the additional guidance should be reviewed to confirm that the methodology used is appropriate. |
| AASB 2022-10 Amendments to Australian Accounting – Fair Value Measurement of Non-Financial Assets of Not-For-Profit Public Sector Entities | Unlikely to have significant impact, however public sector entities should review their fair value methodology to confirm compliance with AASB 13. |
In addition to potential classification changes between current and non-current, there are some new disclosures which entities will have to comply with.
The disclosures are relevant when an entity has covenants which are tested at a future date and therefore are disregarded when classifying liabilities between current and non-current. In this case, entities are required to disclose information so users can understand the risk that the liabilities could become payable within 12 months of the year end, including:
- information about the covenants (including the nature of the covenants and when the entity is required to comply with them) and the carrying amount of related liabilities and;
- facts and circumstances, if any, that indicate the entity may have difficulty complying with the covenants.
The second element of the disclosure would include anything identified by the directors as a potential risk to complying with future covenants, e.g. if the testing date was the year-end then the covenants would not have been met based on the circumstances in existence at that date or the entity is expecting a decline in sales or other financial statement element which could be relevant to a covenant.
These disclosures will require careful consideration and discussions with senior staff, directors and most likely the financier to ensure that they are appropriate and compliant with AASB 101 without disclosing commercial in confidence information.
An update on the AASB Tier 3 proposals for NFP entities
In the December newsletter we discussed the proposals by the AASB to prepare a third tier of accounting standards for certain private-sector not-for-profit entities.
The comment period for the proposals closed at the end of February 2025, the AASB have held two meetings since then and have agreed:
- they will continue the project and begin redeliberating the proposals in the Tier 3 exposure draft;
- the requirements in a final Standard should be developed with regard to the principles used to develop the exposure draft and;
- to update the AASB Not-for-Profit Entity Standard-Setting Framework to address Tier 3 general purpose financial statements (i.e. less NFP entities will be able to prepare special purpose financial statements).
The AASB are not going to determine which entities are able to take advantage of the simplified proposals in Tier 3, this will be a project for the relevant regulator (e.g. ACNC, State and Territory legislative administrators).
Why mandatory climate reporting requirements may affect you even though you are below the thresholds.
Further to our previous articles on mandatory climate reporting requirements and associated thresholds, we wanted to provide some information for entities who are below the thresholds but still may be impacted based on our discussions with clients and other stakeholders.
- Whose value chain are you in? – Are your customers or supplier captured by the requirements, if so, they may request emissions or sustainability-related data to meet their own Scope 3 reporting obligations.
- Stakeholder expectations – Investors, lenders, employees, and the public are increasingly interested in environmental performance and depending on the industry you are operating in or your competitors, there may be a best practice expectation.
- Information requests in other documents – we are hearing more examples of grant providers, customers, donors requiring information about sustainability strategies and emissions as part of their dealings with for-profit and not-for-profit entities.
- Think about your public messaging – If you position yourself as climate-conscious or environmentally responsible then voluntarily reporting some sustainability disclosures may be expected.
- Engage with your board and leadership – Climate risk is a governance issue. Consider whether your board has the right skills, and whether climate and sustainability risks are regularly discussed at leadership level.
Where to start?
Start collecting basic environmental data (e.g. energy usage, travel emissions, waste reduction) to build internal capabilities will enable you to respond to external requests more easily.
Key considerations around going concern
Given the current economic climate in Australia, we are expecting a number of entities to include going concern disclosures in their financial statements and audit reports to include material uncertainties relating to going concern.
Let’s go back to basics and review the relevant requirements from the accounting standards; the two main standards relating to going concern are AASB 101 Presentation of Financial Statements and AASB 110 Events after the Reporting Period.
AASB 101 requires management to make an assessment of entity’s ability to continue as a going concern, i.e. whether management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.
Whilst the accounting standards require an assessment looking forward at least 12 months after the reporting period, the auditing standards require an auditor to consider 12 months after the signing date and therefore management should use this extended timeline to avoid issues with the auditors.
If in making the assessment material uncertainties related to events or conditions that may cast significant doubt upon the entity’s ability to continue as a going concern are identified, then financial statements shall disclose those uncertainties. Unfortunately, the standards do not provide any further information about the nature and extent of the disclosures, however they should be tailored specifically to the facts and circumstances of the entity and be comprehensive. The general disclosures regarding estimates and judgements in AASB 101 should also be considered.
AASB 110 has the concept of adjusting and non-adjusting events after the reporting period, however going concern is an exception to this. If management determine that the going concern basis is not appropriate at any time up to the signing date, then the financial statements are not prepared on a going concern basis.
When an entity does not prepare financial statements on a going concern basis, that fact, together with the basis on which it prepared the financial statements and the reason why the entity is not regarded as a going concern should be disclosed in the financial statements.
As we prepare for the reporting season, there are some resources which may assist you in determining the appropriate approach in relation to going concern.
- IASB has reissued its education material on going concern – available here.
- UK FRC has a comprehensive guide for preparers including a process to be followed when assessing going concern and examples of good disclosures – note that there are some additional requirements in the UK for solvency statements, however most of the guidance relates to IFRS and therefore is relevant for Australian entities – available here.
If you want any more information on any of the topics discussed in this newsletter or to discuss the application to your specific circumstances, please get in touch with your local Accru representative.
"