Mohammad Farahmand
Mohammad Farahmand
Senior Manager

Changes to financial reporting requirements for AFS Licensees were announced by ASIC in June, following changes to Accounting Standards. 

Many AFS Licensees will be required to prepare General Purpose Financial Statements ('GPFS') for the first time and are no longer able to prepare Special Purpose Financial Statements ('SPFS'). 

In this article, we explain who is affected and what the impact will be on AFS Licensees.

WHAT IS CHANGING?Changes to financial reporting requirements for AFS Licensees were announced by ASIC in June, following changes to Accounting Standards.

For financial years commencing 1 July 2021, for-profit companies, registered schemes, and disclosing entities that prepare financial reports under Chapter 2M of the Corporations Act 2001  (the Act) can no longer prepare special purpose financial reports (SPFRs) that do not contain all disclosures required in the full accounting standards.


All AFS Licensees must prepare either:

  •    Tier 1 general purpose financial statements, in accordance with all Australian Accounting Standards (AAS) recognition, measurement, and disclosure requirements; or
  •    Tier 2 general purpose financial statements (the Simplified disclosure regime), for entities that do not have public accountability. Though, they must still apply the full recognition and measurement requirements of the AAS for assets, liabilities, income, and expenses.

Entities that have public accountability must prepare Tier 1 General purpose financial statements.

An entity has public accountability where:

  •    It's debt or equity instruments are traded in a public market, or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
  •    It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses (this would include AFS licensees that hold client monies).

what is the IMPACT?

This means all AFS licensees that previously had not been preparing Tier 1 GPFS are now required to perform an assessment of the public accountability to determine the applicable reporting regime (Tier 1 or Tier 2 simplified disclosure).

ASIC has clarified that some licensees are required to apply the full disclosure requirements to avoid doubt as to whether they have public accountability (including licensees that typically hold client monies or assets), or because they are large or sophisticated licensees with greater market impact.

ASIC considers licensees to have public accountability if they meet any of the below criteria:

  •    Regulated by the Australian Prudential Regulatory AuthorityThis means all AFS licensees that previously had not been preparing Tier 1 GPFS are now required to perform an assessment.
  •    Participants in a licensed market
  •    Participants in a clearing and settlement facility
  •    Retail over-the-counter derivative issuers
  •    Wholesale electricity dealers
  •    Corporate advisors that deal in financial products
  •    Over-the-counter derivatives traders
  •    Wholesale trustees
  •    Responsible entities of a registered scheme
  •    Corporate directors of a corporate collective investment vehicle
  •    Providers of a custodial or depository service
  •    Operators of an investor-directed portfolio service

Financial reports previously prepared as SPFRs for compliance with the Act comply with the recognition and measurement requirements of AASs, however, except for some particular mandatory disclosures, there was a much greater diversity in the level of disclosures included in the notes to the financial statements. 

Tier 2 GPFS, on the other hand, sets more strict rules for measurement, recognition, as well as disclosures. For example:

  •    Licensees who have control over other entities will be required to prepare consolidated financial statements in addition to their single entity financial statements
  •    More disclosures are required in relation to related party transactions financial instrument exposures and lease accounting
  •    Licensees will be required to prepare a cash flow statement


The new disclosure requirements apply from financial years commencing on or after 1 July 2021, but many licensees can choose to defer any new disclosure requirements by one year.

Entities that prepare financial statements under Chapter 2M of the Corporations Act 2001, for example, because they are “large” or foreign-owned, must prepare GPFS for years ended on or after 30 June 2022. The GPFS must include full comparative information in all required disclosures.

AFS licensees that prepared SPFRs last year, and that do not prepare reports under Chapter 2M of the Act can choose to defer the new disclosure requirements to financial years commencing on or after 1 July 2022, meaning that 30 June 2023 will be the first year they must prepare GPFS. For these licensees, comparative information does not need to be restated to comply with GPFS reporting requirements.

Where can I receive assistance with these changes?

Preparing statutory financial statements has become a challenging and time-consuming exercise.

RSM Australia’s financial reporting technology, along with our technical knowledge and expertise, has enabled us to develop an efficient and timely approach to preparing financial statements that ensure regulatory compliance and meet the needs of users.  

RSM Australia can assist in drafting and preparing all different types of financial reports, or with updating financial reports each year to reflect any changes in accounting standards.

For further information

If you have any questions or would like further information, please contact your local RSM office