Effective for reporting periods on or after 1 July 2019, the financial reporting size thresholds for Large Proprietary Companies under the Corporations Act 2001 (the Act) have been doubled. This change has significant implications for accountants in Sydney, as they must consider the revised thresholds when assisting their clients with financial reporting.
The thresholds, which have remained unchanged for almost 12 years, determine whether a Company is deemed “small” or “large” under the Act. Suppose a Company is deemed to be significant. In that case, it must prepare and lodge its financial report with ASIC and, subject to certain limited exceptions, also have an audit of that financial report.
Therefore, the thresholds and a Company’s reporting obligations remain unchanged for reporting periods up to 30 June 2019.
The amendments are in the Corporations Amendment (Proprietary Company Thresholds) Regulations 2019.
What are the thresholds?
The table below summarises the updated reporting thresholds. A Company is deemed to be “large” under the Act if it satisfies at least two out of the three parameters below:
| Parameter * | Thresholds applicable up to 30 June 2019 | Threshold applicable on or after 1 July 2019 |
| Consolidated revenue for the year | $25 million or above | $50 million or above |
| Consolidated Gross Assets as at year-end | $12.5 million or above | $25 million or above |
| Number of employees at the end of the year | 50 employees or more | 100 employees or more |
*Each of the thresholds must be assessed for the Company and any entities it controlled for the year on a consolidated basis
Why have the thresholds been changed?
The Government has noted that the purpose of increasing the reporting thresholds is to reduce the regulatory burden and associated costs for small and mediums sized businesses.
The timing of the change in thresholds also coincides with a significant push by the Australian Accounting Standards Board (AASB) towards streamlining the financial reporting standards and, in particular, addressing the unique anomaly in the Australian reporting requirements under the Special Purpose Reporting Framework – which has for some time been seen as not aligning to the spirit of the international reporting framework.
The AASB has been working on a significant project of removing the provisions of the particular purpose reporting framework with the underlying aim of ensuring that where financial reports need to be produced, they are more aligned to a general-purpose format so that it contains sufficient information for its users to be able to make their decisions. The distinct purpose reporting framework did not provide adequate comparability and usability.
Therefore, we expect the particular purpose reporting framework to be withdrawn very soon – possibly as early as 1 July 2020.
What you should also be aware of?
Whilst the doubling of the thresholds is expected to mean almost a third of large proprietary companies that have been reporting to ASIC will no longer be required to lodge their financial reports post-1 July 2019, the following will most likely still require financial reports to be produced per the Accounting Standards:
- Entities that have bank covenants that require financial statements to be prepared per the Accounting Standards;
- Entities that are directed by ASIC or 5% or more of the shareholders to produce a financial report (and possibly have it audited)
- Certain foreign-controlled entities
- Entities deemed to be part of Significant Global Entities (SGEs).
A further impact on the above is that if the particular purpose reporting framework is removed, compliance with Accounting Standards will require the preparation of general-purpose financial reports with limited disclosure reliefs.
If you would like to learn more about the above changes and their impact, please get in touch with your S&W advisor.
Kreston Stanley Williamson Team
*Correct as of July 2019
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
