Under section 989B(2) of the Corporations Act 2001, AFS Licensees are required to lodge annually with ASIC a profit and loss statement and balance sheet in the prescribed format being ASIC Form FS70 (“financial statements”) and an audit report in the prescribed format being ASIC Form FS71.

When preparing the financial statements of the licensee, the licensee must determine whether the licensee is a reporting entity. Where an entity is a reporting entity, the entity is required to prepare a general purpose financial report that complies with all Australian Accounting Standards and Interpretations (the “Accounting Pronouncements”).

If the licensee is a non-reporting entity, the financial statements are to be prepared in accordance with all of the recognition and measurement requirements of the Accounting Pronouncements, and in accordance with the disclosure requirements of those Accounting Pronouncements that apply to non-reporting entities.
This would include applying the accrual basis of accounting and the recognition and measurement requirements of Accounting Pronouncements dealing with topics such as:

• accounting for financial instruments
• depreciation of non-current assets
• tax-effect accounting
• lease accounting
• goodwill and impairment testing
• measurement of employee entitlement liabilities.
  

Directors of non-reporting entities should consider the need to make disclosures which are not prescribed by the Accounting Pronouncements adopted, but which may be necessary in order for the financial statements to give a true and fair view (e.g. significant related party transactions).