COVID-19: Financial reporting resources

We are a not-for-profit entity and intend to participate in the JobKeeper Program.  How should we present the amounts received as reimbursements of the salaries and wages paid to our eligible employees? 

You should use the provisions in AASB 1058 Income for Not-for-Profit Entities.  The incentive is likely to be accounted for as income under AASB 1058. It needs to be presented as gross income and the related salaries employee expense will be separate.  The option that corporates have of netting the two under AASB 120 is not available.

Companies  might need to raise capital quickly as a result of the impact of COVID-19. What do they need to think about?

In the current circumstances, it’s really important to understand your  financial position, cash flow requirements and the risk of possible covenant breaches.  To mitigate these risks and improve their financial position, some companies may be considering raising additional capital over the next few months. 

ASX-listed companies are permitted to raise capital (eg. by way of rights issue, placement or security purchase plan) without issuing a prospectus or PDS provided certain conditions  in the Corporations Act are met. These are typically known as ‘Low-Doc Offerings’.

A Low-Doc Offering requires a “cleansing statement” that contains specific information, such as information that the company may have withheld from the market on the basis of an exception to its continuous disclosure obligations but which investors and their professional advisers would reasonably require to make an informed decision about whether to subscribe for shares under the capital raising.  While the financial information accompanying a cleansing statement varies from company to company, it typically includes a proforma balance sheet based on the most recent audited/reviewed historical financial information. 

Also, you need to be aware that ASIC and the ASX recently implemented temporary relief to facilitate “emergency” capital raises with the aim of assisting listed companies to raise funds from investors urgently because of the impact of COVID-19 (see ASIC media release and ASX update). This relief will only be available until 2 October 2020 (see ASIC media release 12 June 2020). The ASIC relief has now been extended until 1 January 2021 and the ASX Class Waivers until 30 November 2020.

The ASX has relaxed its restrictions around certain capital raisings (ie. rights offers, placements, share purchase plans), while ASIC has eased their requirements for when ASX-listed companies are permitted to raise capital without issuing a prospectus or Product Disclosure Statement (ie. via a ‘low-doc’ offering).

For more information please contact your PwC Deals team,  Andrew Parker or Rob Silverwood.

My company has a December 2020 year-end. Will we have an extra month to prepare our financial report?

Yes. ASIC has now provided one month extensions for lodging financial reports to listed and unlisted companies with financial years ending up to and including 7 January 2021. Originally, the one month extension only applied to financial years ending up to and including 7 July 2020.

All entities should continue to consider borrowing covenants or other obligations before using these extended deadlines. The reporting deadlines in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 have also been extended by one month for balance dates to 7 January 2021.

ASX listed entities are still required to lodge their Appendices 4E (preliminary final reports) and 4D (interim reports) under ASX Listing Rules by the usual due dates. Listed entities are encouraged to continue with the normal practice of lodging the 4E with audited accounts wherever possible to provide the market with the best information possible on a timely basis. This will avoid the need for additional disclosures to the market should there be any changes to the reported results after the 4E has been released and the need to revisit the going concern assumption when the financial report is being signed. Similar considerations apply to interim reports.

Listed entities must additionally make an announcement to the market stating that they rely on the ASIC relief to delay lodgement of audited financial statements and that they will immediately make a further announcement to the market if there is a material difference between the audited and unaudited financial statements.

See table below for what this means for your reporting deadlines:

Listed entities

Unlisted entities

Do I need to do anything before I can rely on the extended lodgement deadlines?

Not if you are an unlisted entity. The instrument providing the relief does not have any conditions attached and entities do not need to notify ASIC if they wish to rely on the relief. It simply states that entities do not need to comply with the original lodgement deadlines in the Corporations Act 2001 provided they lodge within the new extended lodgement deadlines.

However, listed entities must make an announcement to the market stating that they rely on the ASIC relief to delay lodgement of audited financial statements and that they will immediately make a further announcement to the market if there is a material difference between the audited and unaudited financial statements.

We are an unlisted company, part of a Deed of Cross Guarantee, and use ASIC's relief for wholly-owned entities to exempt us from lodging our standalone financial statements. Our unlisted parent intends to lodge its 31 December 2020 financial statements by the extended 31 May 2021 deadline, but I've heard this might void our relief and mean we have to lodge our own financial statements. Do you have any more information?

The reporting deadline in ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 has been extended by one month for balance dates up to 7 January 2021. Therefore, provided your parent lodges its financial statements by the extended due dates, you will be in compliance with the ASIC instrument and will not have to lodge your own financial statements.