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On 1 July 2021, the financial reporting provisions in the following divisions and sections in the Government Sector Finance Act 2018 (GSF Act) commenced:

• Division 7.1: Interpretation
• Sections 7.4 - 7.7: Accounts and records of GSF agencies, Annual GSF financial statements, Final annual GSF financial statements for former reporting GSF agencies
• Division 7.4: Consolidated government sector reporting
• Section 10.1 and 10.3: Status of the Worker’s Compensation Insurance Fund, Reference of Matters to the Public Accounts Committee.

The commencement of the sections and divisions listed above means that state sector agencies and the consolidated government sector will prepare their 2020-21 financial statements onwards in accordance with the provisions in the GSF Act. The Public Finance and Audit Act 1983 (PF&A Act) financial reporting provisions have been repealed and will no longer apply.

With the commencement of the financial reporting provisions, all of the provisions of the GSF Act have commenced except for provisions related to annual reporting and some financial reporting provisions. These provisions are scheduled to commence on 1 July 2023 subject to the approval by the Governor.

The following Regulations were published on the NSW legislation website on 25 June 2021. The Regulations amend the Government Sector Audit Regulation 2018 and commence on 1 July 2021:

• Government Sector Finance Amendment (Miscellaneous) Regulation 2021
• Government Sector Finance Amendment (Reporting GSF Agency Exclusions) Regulation 2021
• Government Sector Finance Amendment (Transitional) Regulation 2021

NSW Treasury has published a Frequently Asked Questions Fact Sheet on Financial Reporting under the Government Sector Finance Act 2018 which is available from the Government Sector Finance Act 2018 section of Treasury’s website.

Additionally, on 1 July 2021, the PF&A Act was renamed the Government Sector Audit Act 1983 (GSA Act). The GSA Act contains the provisions relating to the Auditor-General and the Audit Office, the audit of government sector finances and governance of the Public Accounts Committee. Of note in the renamed GSA Act is that:

• a new principal object of the GSA Act was added which specifically provides that the Auditor-General is an independent and accountable statutory officer
• the previous provisions in the PF&A Act relating to financial reporting were repealed, for example, provisions in Divisions 3 and 4A of Part 3 of the PF&A Act
• a new section 34 was added which contains the requirements for the audit of state sector agencies’ financial statements, which were previously contained in two separate sections.

The remaining provisions in the GSA Act remain largely unchanged except for some changes in terminology.

The Government Sector Audit Regulation 2021 (GSA Regulation) also commenced on 1 July 2021. The GSA Regulation lists the entities, funds and accounts that may be required to have their financial reports audited by the Auditor-General on the request of the Treasurer, a responsible Minister or a prescribed requestor under Division 4 ‘Particular audit of prescribed entities’ of the GSA Act.

The Public Finance and Audit Regulation 2015 has been repealed from 1 July 2021.

TC 21-02 ‘Statutory Act of Grace Payments’

NSW Treasury has released TC 21-02 Statutory Act of Grace Payments (the Circular) to advise that Ministers have the power under section 5.7 of the Government Sector Finance Act 2018 (GSF Act) to make a Statutory Act of Grace Payment when the Minister, or Minister’s delegate, is satisfied that there are “special circumstances”, or other circumstances of a kind prescribed by regulation. Treasury does not presently intend to prescribe any other circumstances.

A Minister may delegate the function of making a Statutory Act of Grace Payment to the accountable authority for a GSF agency; a person employed in a Public Service agency responsible to the Minister or an entity prescribed by regulation under the GSF Act. This function cannot be subdelegated.

The Circular requires the accountable authority of a GSF agency to maintain a written register of Statutory Act of Grace Payments made in connection with the agency which they must review and certify at least annually. The register should be submitted to the agency’s Audit and Risk Committee for review at least annually and must be published on the agency’s website.

TPP 21-03 ‘Accounting Policy: Guidance on Administered Items’

NSW Treasury has released TPP 21-03 ‘Accounting Policy: Guidance on Administered Items’ (the Policy) to provide practical guidance for NSW government entities on assessing whether transactions, assets or liabilities are administered items within the scope of AASB 1050 ‘Administered Items’.

Administered items are those not controlled, but “administered” by the entity on behalf of the State or other State government entities. Items should only be treated as ‘administered’ if either of the following criteria is met (often the two limbs are interlinked in practice):

• benefits: the entity does not have the power to use the assets / revenue proceeds, or incur the liabilities / expenses, for its own purpose / for the achievement of its own objectives, without further authorisation; or
• discretion: the entity does not have substantial discretion over any of the following aspects of the transaction:
  • the amounts of the transaction (e.g. the amount to be transferred to eligible beneficiaries)
  • the identity of the transaction counterparty (e.g. beneficiaries)
  • the timing of the transaction (e.g. payment)
  • the conditions under which the transaction is to incur (e.g. payments are to be made).

Appendix A of the Policy provides a list of indicators to help an entity determine whether they benefit from or have discretion over the transaction.

Where agencies identify new administered items, information should be provided to the relevant agency that controls those transactions, so that the agency can record the transactions in its financial statements.

Treasurer’s Direction, Circular and Policy Paper on Mandatory Annual Returns to Treasury’

NSW Treasury has released TD 21-02 ‘Treasurer’s Directions for the Mandatory Annual Returns to Treasury’ (TD 21-02) and TPP 21-04 'Agency Direction for the 2020-21 Mandatory Annual Returns to Treasury (TPP 21-04) which details the procedures agencies must follow each year to comply with the requirements to submit Annual Returns for financial years ending 30 June.

TD 21-02 and TPP 21-04 applies to all entities listed in Appendix A of TD 21-02 that are GSF agencies and to the accountable authorities of those GSF agencies. TD 21-02 and TPP 21-04 withdraws and supersedes TPP 20-05 ‘Agency Direction for the 2019-20 Mandatory Annual Returns to Treasury’.

Additionally, NSW Treasury issued TC 21-04 ‘Agency guidelines for the 2020-21 Mandatory Annual Returns to Treasury for NSW public sector agencies that are not included in TD21-02'.

AASB 2021-2 'Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates'

AASB 2021-2 'Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates' (AASB 2021-2) was issued to help preparers improve accounting policy disclosures so that they can provide more useful information to investors and other primary users of financial statements and distinguish changes in accounting estimates from changes in accounting standards. AASB 2021-2 which applies to annual reporting periods beginning on or after 1 January 2023 amends:

• AASB 7 ‘Financial Instruments: Disclosures’ to clarify that information about measurement bases for financial instruments is expected to be material to an entity’s financial statements
• AASB 101 ‘Presentation of Financial Statements’ to require entities to disclose their material accounting policy information rather than their significant accounting policies. Accounting policy information is material if, when considered together with other information included in an entity’s financial statements, can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements
• AASB 108 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ to clarify how entities should distinguish changes in accounting policies and changes in accounting estimates
• AASB 134 ‘Interim Financial Reporting’ to identify material accounting policy information as a component of a complete set of financial statements
• AASB Practice Statement 2 ‘Making Materiality Judgements’, to provide guidance on how to apply the concept of materiality to accounting policy disclosures.

AASB 2021-3 'Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions beyond 30 June 2021'

The AASB released AASB 2021-3 'Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions beyond 30 June 2021' (AASB 2021-3) to amend AASB 16 ’Leases’ to extend by one year the application period of the practical expedient added to AASB 16 by AASB 2020-4 'Amendments to Australian Accounting Standards – COVID-19-Related Rent Concession's.

The practical expedient permits lessees not to assess rent concessions that occur as a direct consequence of the COVID-19 pandemic and meet specified conditions as lease modifications but to account for those rent concessions as if they were not lease modifications.

AASB 2021-3 extends the practical expedient to rent concessions that reduce only lease payments originally due on or before 30 June 2022, provided the other conditions for applying the practical expedient are met.

Commencement of the Local Government Amendment Act 2021

The Office of Local Government (the OLG) has recently released Circular 21-07 ‘Commencement of Local Government Amendment Act 2021’ to advise that the Local Government Amendment Act 2021 (Amendment Act) was assented to on 24 May 2021. Certain reforms come into effect on the date of assent, with some reforms commencing at a later date by proclamation.

The Amendment Act amends the Local Government Act 1993 (LG Act) to:

• give effect to certain recommendations made by the Independent Pricing and Regulatory Tribunal
• provide for superannuation contributions for councillors
• make minor changes that relate to council elections and the terms of office of chairs of county councils and joint organisations.

Some of the key amendments to the LG Act include:

• special rates may be levied for or towards meeting the costs of works, services, facilities or activities provided or undertaken, or proposed to be provided or undertaken, by councils together with certain government entities
• Ministerial orders that specify percentages for the variation of councils’ incomes will be able to specify different percentages for different councils or a methodology for calculating a percentage
• a new rating category for environmental land
• revisions to the ways in which sub-categories may be determined for categories of ordinary rates, including by requiring sub-categories to be identified by geographical names
• councils created by merger in 2016 that have yet to harmonise their rating structures have more flexible options for their rating structures, including the option to harmonise rates gradually over up to eight years
• councils will have the option to make superannuation contribution payments for councillors from 1 July 2022 equivalent in amount to superannuation guarantee payments. The decision to make superannuation contribution payments must be made by resolution at an open meeting
• the term of office of chairpersons of county councils has been extended to two years, aligning it with the terms of office of mayors elected by councillors and chairpersons of joint organisations. Technical amendments have also been made to clarify that the terms of chairpersons of county councils and joint organisations expires on the election day of their member councils.

OLG advise further rating reforms that do not rely on the Amendment Act will be implemented by making changes to regulations and releasing new guidance later this year.

Circular 21-06 2021/22 ‘Determination of the Local Government Remuneration Tribunal’

The Office of Local Government issued Circular 21-06 ‘2021/22 Determination of the Local Government Remuneration Tribunal’ (the Circular). The Circular advises councils:

• the Local Government Remuneration Tribunal (the Tribunal) has determined an increase of 2% to mayoral and councillor fees for the 2021-22 financial year, with effect from 1 July 2021
• the Tribunal found that the allocation of councils into current categories continued to be appropriate having regard to the 2020 review, the current category model and criteria, and the evidence put forward in the submissions received
• sections 248 and 249 of the Local Government Act 1993 require councils to fix and pay an annual fee to councillors from 1 July 2021 based on the Tribunal’s determination for 2021-22 financial year
• the level of fees paid will depend on the category the council is in
• that a council cannot fix a higher than the maximum amount determined by the Tribunal
• that if a council does not fix a fee, the council must pay the minimum fee determined by the Tribunal.

Cyber security has increasingly becoming a significant consideration for governments, entities, regulators, and the public. Over the past few years, there has been a growth in cyber-attack, including against several high-profile Australian entities, which have had an extensive impact on their business operations.

In May 2021, the Australian Auditing and Assurance Board released ‘The Consideration of Cyber Security Risks in an Audit of a Financial Report’, to help auditors to consider the direct and indirect impact of cyber security on the audit of financial statements in accordance with the Australian Auditing Standards. Under Australian Auditing Standards, auditors are required to identify and assess the risks of material misstatements in the financial statements, whether due fraud or error, and design and perform relevant audit procedures to address those risks. Auditors’ responsibility over cyber security risks, like any other risks, is to consider and identify whether there is a risk of material misstatement to the financial statements as part of risk assessment procedures and respond to the risks accordingly.

In addition to auditor’s responsibilities, management with oversight from those charged with governance (TCWG) are responsible for preparing the financial report in accordance with the applicable financial reporting framework and designing and implementing internal controls as necessary. For those entities whose operations could be significantly impacted, it is important for management and TCWG to consider the risks related to cyber security and if an event was to occur, whether it would quantitatively or qualitative affect the financial statements. The publication provides some examples of direct and indirect impacts on the financial statements where a cyber security event has occurred:

• recognition of provisions or disclosure of contingent liabilities as a result of a data breach
• change in fair value of or impairment of assets
• implications for the entity’s ability to continue as a going concern.

The Australian Securities and Investment Commission (ASIC) acknowledges that the COVID-19 conditions continue to evolve which makes the quality of financial reporting and disclosures more important to keep investors informed. ASIC’s media release on 10 June 2021 highlighted the following key focus areas for financial reporting by companies for reporting periods ending 30 June 2021 under COVID-19 conditions:

• asset values – matters relating to impairment of non-financial assets, value of property assets, expected credit losses on loans and receivables, and values of other assets
• provisions – matters such as onerous contracts, financial guarantees and restructuring
• solvency and going concern assessments
• events occurring after year-end and before completing the financial report that may affect assets, liabilities, income or expenses at year-end or relate to new conditions that require disclosure
• disclosures on financial report and Operating and Financial Review.

Additional information on the impact of COVID-19 on financial reporting and audit matters is included in ASIC’s frequently asked questions publication.

Topics discussed included:

AASB Meeting Highlights – 21-22 June 2021

• not-for-profit financial reporting framework
• AASB agenda consultation
• IASB agenda consultation
• sustainability reporting
• research update
• regulatory assets and liabilities
• audit engagement-related disclosures
• going concern
• business combinations under common control
• IPSASB EDs on public sector measurement
• Insurance activities in the public secto
• AASB standard-setting frameworks – Tier 2 principles for IFRS disclosure amendments
• AASB 1058 ‘Income for Not-for-profit Entities’ targeted outreach

AASB Meeting Highlights – 20-21 April 2021

• not-for-profit (NFP) financial reporting framework
• NFP entity definition
• ASIC presentation
• insurance activities in the public section
• AASB 1059 Service Concession Arrangements: Grantors
• AASB agenda consultation
• post-implementation review of AASB 10, 11 and 12
• intangibles research (including Baljit Sidhu research presentation
• going concern
• research update

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

Topics discussed included:

IASB Meeting Highlights – 22-23 June 2021

• work plan
• insurance contracts
• equity method
• maintenance and consistent application
• primary financial statements
• goodwill and impairment

IASB Meeting Highlights – 24, 26-27 May 2021

• maintenance and consistent application
  • attributing benefit to periods of service
  • hedging variability in cash flows due to real interest rates
  • lease liability in a sale and leaseback
  • IFRIC update
• disclosure initiative – subsidiaries that are SMEs
• dynamic risk management
• goodwill and impairment
• financial instruments with characteristics of equity
• second comprehensive review of the IFRS for SMEs standard
• primary financial statements
• accounting for derecognised financial assets when insurers first apply IFRS 17

IASB Meeting Highlights – 27-28 April 2021

• goodwill and impairment
• primary financial statements
• maintenance and consistent application
  • IFRIC update
• dynamic risk management
• financial instruments with characteristics of equity

Latest news from the IASB included:

Topics discussed included:

IPSASB Meeting Highlights – 15-18 and 22 June 2021

• improvements to IPSAS 2021
• natural resources
• revenue and transfer expenses
• accounting and reporting by retirement benefit plans
• conceptual framework – limited scope update – next stage
• approval of pronouncements / exposure drafts
• amendments to IPSAS 5, borrowing costs (non-authoritative guidance)
• program and technical director’s report on work program

IPSASB Meeting Highlights – 29 April 2021

• transfer expenses

Recent news from the IPSASB included:

Topics discussed included:

AUASB Meeting Highlights – 8-9 June 2021

• AUASB digital standards portal
• FRC and audit quality update
• AUASB preamble – approval of ED
• ASA 560 – approval of ED
• IAASB matters
• ASIC update
• AUASB technical work program and IAASB 2022-23 work plan survey

AUASB Meeting Highlights – 20 April 2021

• audit engagement related disclosures
• AUASB preamble
• extended external reporting
• technology

Latest news from the AUASB included:

Topics discussed included:

IAASB Meeting Highlights – 14-23 June 2021

• LCE standard
• fraud
• ISA 600 (Revised)

IAASB Meeting Highlights – 10-11 May 2021

• audits of less complex entities
• going concern

IAASB Meeting Highlights – 21-22 April 2021

• complexity, understandability, scalability and proportionality proposals
• fraud

Latest news and publications from the IAASB included:

Topics discussed included:

APESB Meeting Highlights – 10 June 2021

• proposed revised APES GN 30 ‘Outsourced Services’
• proposed revisions to 320 ‘Quality Management for Firms’
• international and other activities
• project update on technology
• project proposal APES 215 ‘Forensic Accounting Services’
• proposed revisions to APES 330 ‘Insolvency Services’
• proposed revisions to APES 110 for Non-Assurance Services

APESB Meeting Highlights – 14 May 2021

• Proposed revision of fee-related provisions in APES 110

Latest news and media releases from the APESB included:

Topics discussed included:

IESBA Meeting Highlights – 9-11, 14 & 25 June 2021

• quality management – related conforming amendments
• definitions of listed entity and public interest entity
• technology project updates
• engagement team – group audits independence
• benchmarking
• rollout – non-assurance services and fees
• tax planning and related services

Latest news and publications from the IESBA included:

Treasury’s recent releases included:  

DPC released the following memos and circulars:

DCS released the following circulars:

NSW Procurement Board’s recent Directions included:

Inquiries and Reports tabled in NSW Parliament included:

Recent publications included:

 Recent media releases included:

 Recent IPART papers and reports included: