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On 1 May 2019, the NSW Government released a number of Administrative Arrangement Orders (the Orders), which amended previous orders released on 2 April 2019. The Orders realigned agency responsibilities into new or amalgamated agencies, abolished some existing agencies, and re -allocated Ministerial responsibilities. The relevant Orders are:

• Administrative Arrangements (Administrative Changes-Public Service Agencies) Amendment Order 2019, amending the Administrative Arrangements (Administrative Change-Public Service Agencies) Order 2019
• Administrative Arrangements (Administrative Changes-Ministers) Order (2) 2019, amending the Administrative Arrangements (Administrative Changes-Ministers) Order 2019
• Administrative Arrangements (Administration of Acts-General) Order (No.2) 2019. This order allocates to Ministers the administration of all NSW Acts, and amends the previous allocation specified in the Administrative Arrangements (Administration of Acts-General) Order 2019 Order.

From 1 July 2019, the NSW Government will be structured into the following clusters:

• Premier and Cabinet
• Treasury
• Customer Service
• Planning, Industry and Environment
• Transport
• Health
• Education
• Stronger Communities.

A summary of the new arrangements is available on the Department of Premier and Cabinet website.

Guidance about how restructures should be accounted for is available in TPP 09-3 ‘Accounting Policy - Contributions by owners made to wholly-owned Public Sector Entities’. Agency restructures can be complex and introduce new risks, particularly on transition. Agencies affected by the restructures will need to incorporate plans to address the impact on the changes to the:

• function(s)/staff that will be transferred in or out, including the physical move of function(s)/staff
• reporting structures with consequential impacts on delegations, bank signatories and inter-entity confirmations
• information technology infrastructure, security, systems and processes
• preparation of the 2018-19 financial statements such as the ability for agencies to collect key management personnel information post 1 July 2019, note disclosures highlighting subsequent events and the signing of the financial statements.

The above is not intended to be an exhaustive list and agencies are recommended to fully assess the impact of the restructure. Agencies impacted should have plans in place to ensure they have the necessary resources to effect the Machinery of Government changes.

Relevant agencies should make disclosures in their 30 June 2019 financial statements in accordance with TC19-06 'Financial Statements Disclosures for Machinery of Government Changes'.

Recent policy papers and circulars released by NSW Treasury include:

TPP19-05 ‘Accounting Policy: Accounting for Financial Instruments’ (TPP19-05) provides guidance to agencies in applying AASB 9 ‘Financial Instruments’ and AASB 132 ‘Financial Instruments: Presentation’, including:

• classification of financial instruments
• impairment of financial assets
• hedge accounting.

TPP19-05, which supersedes TPP08-1, applies to all NSW public sector agencies including statutory State-Owned Corporations for financial years beginning on or after 1 July 2018.

TC19-06 ‘Financial Statements Disclosures for Machinery of Government Changes’ details the disclosures that agencies impacted by the machinery of government changes should make in their 30 June 2019 financial statements.

Circular ‘AASB 15 Revenue from Contracts with Customers and AASB 1058 Income of Not-for-Profit Entities Transition Elections’ prescribes the options that NSW public sector agencies are to elect on adoption of these standards.

The Circular applies to all NSW public sector agencies including State-Owned Corporations.

TC19-05 ‘Agency guidelines for the 2018-19 Mandatory Annual Returns to Treasury’ (TC19-05) details the year end requirements and timetable for submitting Annual Returns to Treasury.

TC19-05, which supersedes TC18-06, applies to all NSW public sector agencies including State-Owned Corporations that are required to submit Prime returns. Appendix A to TC19-05 contains the year-end timetable for the Annual Return procedures and submission of financial statements.

The Office of Local Government (OLG) recently issued Circular 19-04 ‘Final Code of Accounting Practice and Financial Reporting (update 27) including Joint Organisations Supplement’ (the Code).

The Code prescribes the format for preparing councils’ and joint organisations’ (JOs) 2018-19 financial statements and must be used to ensure compliance with the financial reporting requirements of the Local Government Act 1993 and the Local Government (General) Regulation 2015. It applies to NSW:

• council’s preparing general purpose financial statements (GPFS), special purpose financial statements (SPFS) and special schedules; and
• JOs preparing GPFS for the first time.

The JO Supplement within the Code supports JOs preparing GPFS for the first time (from proclamation date to 30 June 2019) and prescribes the Reduced Disclosure Requirements (RDR) framework for their GPFS.

A full summary of the changes is available on the OLG website.

The Australian Securities and Investments Commission (ASIC) recently released 19-143MR Major financial reporting changes and other focuses announcing its focus areas for 30 June 2019 financial reports of listed entities and other public interest entities.

ASIC has called on preparers to focus on new requirements that can materially affect reported assets, liabilities and profits.

The key focus areas are:

• impact of the new accounting standards
• impairment testing and asset values
• revenue recognition
• expense deferral
• off-balance sheet arrangements
• tax accounting
• disclosures on operating and financial review, non-IFRS financial information, and estimates and accounting policy judgements.

The Australian Government recently made the Corporations Amendment (Proprietary Company Thresholds) Regulations 2019 (the Regulation).

This Regulation doubles the previous thresholds in paragraph 45A of the Corporations Act 2001 (Corps Act) for determining whether a company is a small or large proprietary company for a financial year.

For financial years beginning on or after 1 July 2019, a proprietary company is large for a financial year if it satisfies at least two of the following:

• the consolidated revenue for the financial year of the company and any entities it controls is $50 million or more;
• the value of the consolidated gross assets at the end of the financial year of the company and the entities it controls is $25 million or more; and
• the company and any entities it controls have 100 or more employees at the end of the financial year.

Under the Corps Act, large proprietary companies are required to submit an annual financial report, a director’s report and an auditor’s report to the Australian Securities and Investments Commission (ASIC). In contrast, small proprietary companies must keep sufficient financial records and are only required to lodge or have their financial reports audited if directed by ASIC or by 5 per cent or more of their shareholders.

The AASB and AUASB jointly released a paper on Climate-related and Other Emerging Risks Disclosures: Assessing financial statement materiality using AASB/IASB Practice Statement 2.

The paper recommends preparers of financial statements consider whether investors could reasonably expect that emerging risks, including climate-related risks, could affect the amounts and disclosures in the financial statements, and what disclosures relating to those risks in the financial statements are material.

Underpinning this recommendation is the AASB/IASB Practice Statement 2 Making Materiality Judgements (APS 2) paper which considers qualitative external factors such as the industry in which an entity operates, and investor expectations as potentially ‘material’ and thus warrant disclosure.

Although APS 2 is not mandatory, the AASB and AUASB have stated that they expect directors, preparers and auditors to be ‘considering APS 2 when preparing and auditing financial statements for their next half year and full year ends’.

Preparers of financial statements should:

• determine whether there are any implications to the entity of climate-related and other emerging risks in relation to regulatory obligations, market impacts, capital expenditure or the entity’s overall objectives and strategies; and
• consider climate-related and other emerging risks when making fair value estimates, performing impairment assessments and assessing expected credit losses and provisions.

Climate-related and other emerging risks are not expected to impact all entities or industries, although each entity will need to make that assessment to determine whether any disclosures are required to reflect these risks in their financial statements.

The Australian Accounting Standards Board (AASB) released ‘AASB Research Report 10: Legislative and Regulatory Financial Reporting Requirements’ (Research Report) in March 2019.

This piece of work was undertaken to address the International Accounting Standards Board’s (IASB) revised Conceptual Framework for Financial Reporting (‘RCF’) publication in March 2018. In order for the AASB to adopt the RCF in Australia, the AASB needed to first resolve the ‘reporting entity’ definition clash with the RCF which if adopted without modification in the Australian context, would remove the ability to produce ‘special purpose financial statements’ (SPFS). The AASB adopted a two-phased approach to address:

• phase 1 in the short term, to maintain International Financial Reporting Standards issued by the IASB (IFRS) compliance for publicly accountable entities and entities voluntarily claiming IFRS compliance
• phase 2 in the medium term, maintain IFRS as a base by removing the Australian reporting concept, removing SPFS from Australian Accounting Standards (AAS) and providing a Tier 2 GPFS framework.

This Research Report was commissioned to inform phase 2 by:

• identifying entities with financial reporting obligations under Federal and State/Territory legislation that will or may be captured by the AASB in Phase 2 of its project to revise the financial reporting framework in Australia and remove entities’ ability to lodge special purpose financial statements with regulators, and
• grouping entities under different reporting categories, which will provide a basis for the AASB to consider which entities should be captured by the requirement to prepare financial statements that comply with AAS, and ultimately assist in drafting the application paragraphs for the proposed revised accounting standards.

It is important to note that not-for-profit and public sector entities were excluded from this analysis, consistent with the AASB’s decision to limit phase 2 of the adoption of the RCF to for-profit entities.

Topics discussed included:

AASB Meeting Highlights – 14 June 2019

• AASB 1054 – Disclosure of compliance with recognition and measurement in Special Purpose Financial Statements (SPFS)
• Implementation of AASB 1059 ‘Service Concession Arrangements: Grantors’
• New Tier 2 Standard based on IFRS for SMEs disclosures – exposure draft
• Fair value measurement for public sector entities
• Removal of SPFS for for-profit entities – phase 2 ED.

AASB Meeting Highlights – 30 April 2019

• AASB 1054 – disclosure of compliance with recognition and measurement principles in SPFS
• Removal of SPFS for for-profit entities – transitional relief and timelines
• AASB 1059 ‘Service Concession Arrangements: Grantors’ – Implementation
• Fair value measurement for public sector entities
• Financial statements of non-disclosing entities lodging with ASIC
• International documents open for comment.

Latest news, accounting standards and work-in-progress documents from the AASB included:

Topics discussed included:

IASB Meeting Highlights – 17-19 June 2019

• Primary financial statements
• Rate-regulated activities
• Goodwill and impairment
• Small to Medium Enterprise (SME) standard review and update
• Financial instruments with characteristics of equity
• Business combinations under common control
• Implementation matters – Property, plant and equipment: proceeds before intended use (amendments to IAS 16).

IASB Meeting Highlights – 14-16 May 2019

• Provisions
• Implementation matters: onerous contracts-cost of fulfilling a contract (amendments to IAS 37)
• Primary financial statements
• Amendments to IFRS 17 ‘Insurance Contracts’
• Disclosure initiative
• SME standard review and update
• Rate-regulated activities
• Goodwill and impairment.

IASB Meeting Highlights – 9-11 April 2019

• Amendments to IFRS 17 ‘Insurance Contracts’
• Business combinations under common control
• Accounting policies and accounting estimates (Amendments to IAS 8)
• Disclosure initiative
• Primary financial statements
• Goodwill and impairment
• Dynamic risk management.

Latest news from the IFRS Foundation included:

Topics discussed included:

IPSASB Meeting Highlights – 18-21 June 2019

• Public sector specific financial instruments – approval of application guidance
• Improvements – approval of exposure draft
• Leases
• Infrastructure
• Heritage
• Revenue with performance obligations
• Revenue without performance obligations (updated IPSAS 23)
• Grants and transfers: expense.

Recent news and publications from the IPSASB included:

Topics discussed included:

AUASB Meeting Highlights – 12-13 June 2019

• Review of June 2019 IAASB papers
• Quality management standards submission
• GS 005 ‘Using the Work of a Management’s Expert’
• Revision of AUASB guidance statements
• FRC / audit quality update
• AUASB emerging external reporting (EER) submission
• Auditor implications arising from AASB ED’s on removal of special purpose accounts
• Public sector Project Advisory Group (PAG) Update
• Joint session with the AASB.

AUASB Meeting Highlights – 16 April 2019

• ED 05/19 ASRE 2410 ‘Review of a Financial Report Performed by the Auditor of the Entity’
• Presentations from ASIC and the AASB
• International Auditing and Assurance Standards Board (IAASB) developments
• Feedback on extended external reporting phase 1 guidance
• AUASB Guidance Statements
• Updates on other current AUASB Projects.

AUASB Meeting Highlights – 20 March 2019 (via teleconference)

• Approval of Exposure Drafts for Quality Management Standards.

Latest news from the AUASB included:

Topics discussed included:

IAASB Meeting Highlights – 17-21 June 2019

• ISA 315 (Revised)
• Agreed-upon procedures
• IASB update
• Auditor reporting post implementation review
• ISA 600 (Revised)
• Audit evidence
• EER assurance.

IAASB Meeting Highlights – 10 April 2019

• Audit of less complex entity’s draft discussion paper.

Latest publications from the IAASB included:

Topics discussed included:

APESB Meeting Highlights – 5 June 2019

• Proposed revisions to APESB pronouncements (ED 01/19)
• Proposed Exposure Draft ED 02/19 to revise various APESB pronouncements
• Proposed revisions to APES 330 ‘Insolvency Services’
• International and other activities
• Update on international EDs on quality management
• Review of APES 230 ‘Financial Planning Services'
• RMIT presentation on ethics game.

Latest news from the APESB included:

Topics discussed included:

IESBA Meeting Highlights – 17-19 June 2019

• Role and mindset – ED approval
• Fees
• Rollout of the revised restructured code
• eCode
• Non-assurance services
• IAASB-IESBA coordination
• Technology
• Emerging issues or developments

Latest publications from the IESBA included:

Treasury’s recent releases included:

DPC's recent memos and circulars included:

NSW Procurement Board’s recent Directions and Procurement alerts included:

Recent publications included:

Recent media releases included:

Recent IPART papers and reports included:

Recent news and publications included: