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It is once again reporting season for those preparing 31 December 2017 half-year or full-year accounts. Fortunately, for most entities there are only minor changes to accounting standards that could potentially impact on their financial statements. Below is a summary of the main areas of note for this reporting season.

Reduction in Tax Rates for Small Businesses

On 9 May 2017, the final approval for the reduction in tax rates for small businesses was given by the House of Representatives for a second time. The amendments were therefore considered substantively enacted on that date and are now law. As such, the corporate tax rate is now reduced to 27.5% for companies carrying on a business with an aggregate turnover not exceeding: - $10m for the income tax year ending 30 June 2017 - $25m for the income tax year ending 30 June 2018 - $50m for the income tax year ending 30 June 2019 AASB 112 Income Taxes requires that the reduction in the corporate tax rate impact the measurement of the current tax in the year in which the new rate becomes effective. For entities with 31 December 2017 annual reporting dates, this means careful consideration of which tax year their accounting period relates to in order to assess their eligibility for the reduced rate based on their aggregate turnover.

More Cash Flow Statement Disclosures

New disclosures about the changes in financial liabilities arising from cash flow and non-cash flow items have been introduced by AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107. The changes are mandatory for annual periods beginning on or after 1 January 2017 and therefore 31 December 2017 financial statements will need to disclose a reconciliation of cash and non-cash movements in liabilities arising from financing activities and movement in financial assets used to hedge liabilities arising from financing activities. AASB 2016-2 does not specify how the additional disclosures must be presented, however includes Example C as an illustration of one possible way of providing the disclosures. Paragraph 44D of AASB2016-2 requires the items disclosed in the reconciliation to be reconciled with movements in the cash flow statement and therefore the Example C reconciliation will need to be adapted by each entity to suit their needs.

ASIC Areas of Focus

The Australian Securities and Investments Commission’s (‘ASIC’) areas of focus for 31 December 2017 are very much similar to 30 June 2017 and broadly focus on the following three areas: - Accounting estimates: including impairment testing and asset values; - Accounting policy choices: including revenue recognition, expense deferral, off-balance sheet arrangements and tax accounting; and - Key disclosures: including estimates and accounting policy judgements and the impact of new revenue, financial instrument, lease and insurance standards.

Significant Global Entities

Significant Global Entities, businesses with annual global income of $1b or more or businesses that are members of international consolidated groups with annual worldwide income of $1b or more, will now be required to lodge audited general purpose financial statements with the Australian Tax Office (‘ATO’). This will only impact on entities that are currently not preparing general purpose financial statements as they may be lodging special purpose financial statements with ASIC or relying on relief available from ASIC. Entities affected will be able to use reduced disclosures when preparing the general purpose financial statements and will need to lodge the financial statements with the annual tax return. Guidance has been issued by the ATO on who will be required to lodged general purpose financial statements.

Need help?

If you require any assistance in the preparation of your 31 December 2017 financial statements or have any questions, please feel free to contact a member of our team.