A Consolidated Entity Disclosure Statement is required for the first time from public companies lodging annual financial reports with ASIC for years ending 31 December 2024.
Here are some tips for first-time preparers drawn from observation of what companies did for 30 June 2024 and questions we received.
- For an entity that has subsidiaries, prepare the statement as a stand-alone component of the financial report, outside of the financial statements;
- Keep the disclosures separate from any made under AASB 12 or related party notes, but cross-check for consistency;
- If the entity has no subsidiaries, identify a suitable place within the financial statements to make the simple declaration of that fact;
- Ensure there are auditable processes with internal controls in place to support the statements approved by directors. These should include processes to record all subsidiaries created and acquired, and identify their tax jurisdiction;
- Apply the requirements to all public companies that are required by the Corporations Act to prepare annual financial reports – this includes not-for-profit entities such as companies limited by guarantee;
- The new statement is not applicable to public companies that prepare annual reports in accordance with other legislation, such as charities reporting to the ACNC;
- Be careful to:
- establish and record the company’s approach to materiality in connection with the “true and correct” declaration; and
- reflect that in the wording of director declarations and the audit report.
Different views were expressed, for example in the debate around the auditing guidance bulletin, the Minister’s 5 July 2024 statement and ASIC Information Sheet 284. It makes sense to develop your own wording rather than accepting a template without understanding its meaning; and
- Use the clarifying changes to section 295(3A) the government has proposed to apply from 30 June 2025 to address queries you may have, such as:
- including in disclosures of multi-jurisdictional tax residencies those entities that have Australia as one jurisdiction – don’t restrict the disclosure to entities that have only foreign tax jurisdictions; and
- recording partnerships and trusts as residents of Australia even though existing tax law does not have a residency test for entities taxed ion a “flow-through” basis.
Sonya Sinclair