Global

Details

  • Service: Tax
  • Type: Regulatory update, Survey report
  • Date: 1/1/2014

Australia - Accounting 

International funds and fund management survey
1.1 Requirement to produce financial statements
1.2 Requirement to audit financial statements
1.3 Publication of financial statements
1.4 Accounting standards
1.5 Contents of financial report
1.6 Appendix


Collective investment funds or schemes are normally structured as unit trusts in Australia. Such funds can take different forms. Generally they are either Registered Managed Investment Schemes (MIS) and subject to regulation under the Corporations Act or they can be superannuation funds and subject to regulation under the Superannuation Industry (Supervision) Act. Superannuation funds are vehichles that hold and invest the compulsory retirement savings of Australian workers.


1.1 Requirement to produce financial statements

Requirement to maintain the books and records


Written financial records must be kept for all regulated Australian schemes. The financial records must correctly record and explain the scheme’s transactions and financial position, and performance. The financial records should enable true and fair financial statements to be prepared and audited.


Production of financial statements by MIS


MIS are required to produce an annual financial report and a directors’ report under the Corporations Act 2001.


Certain disclosing entities are required to prepare a half-year financial report and directors’ report. Disclosing entities are defined by the Corporations Act and are generally registered funds with more than 100 investors.


A Responsible Entity (RE) must be appointed to manage schemes registered under the Corporations Act. The directors of the RE are responsible for the financial report of the scheme. One director of the RE should sign the directors’ report, which is attached to the scheme’s financial report.


Production of financial statements by superannuation funds


Superannuation funds are required to produce an annual financial report and a trustee’s report under the Superannuation Industry (Supervision) Act 1993 (SIS).


There is not requirement for superannuation funds to produce a half-year financial report.


A Responsible Superannuation Entity (trustee) must be appointed to manage the superannuation fund under SIS. Responsible Superannuation Entities are usually incorporated entities. The directors of the trustee are responsible for the financial report of the superannuation fund. The annual trustee’s report to members is not required to accompany the annual financial report.


Choice of period/year-end for schemes


Australian schemes can choose their own year end. However, most schemes have a 30 June year end which coincides with the Australian tax year end. There is almost no scope to obtain a tax year end other than 30 June.


The first financial year for a scheme starts on the day the MIS is registered with Australian Securities and Investments Commission (ASIC) or the day the superannuation fund is registered with the Australian Prudential Authority (APRA). For MIS, the first financial year lasts for a period of up to 12 months (not longer than 18 months) as determined by the directors of the RE. For superannuation funds, the first financial year lasts for a period of up to 12 months to its chosen year end.


A half-year for a scheme is the first six months of the financial year. The directors may determine that the half-year is to be shorter or longer (but not by more than seven days).


Requirement for comparatives


Comparatives are required for all financial statements.


Restrictions on the currency under which financial statements must be prepared


The reporting currency is the currency determined to be the functional currency under Australian Accounting Standards (which mirror the requirements of International Financial Reporting Standards).


Accounting publications specific to the funds industry (as issued by accounting bodies or the regulators)


There is a specific accounting standard that deals with financial reporting by superannuation funds – AAS 25 Financial Reporting by Superannuation Plans. Apart from this standard, there are no accounting publications specific to the funds industry issued in Australia. An industry body, the Financial Services Council (FSC)(formerly, the Investment and Financial Services Association), publishes FSC Standards and Guidance Notes, some of which deal with specific accounting and disclosure topics for MIS. The guidance notes are not mandatory; however, adoption of the notes is considered best practice in Australia.


MIS must comply with disclosure requirements contained in the Accounting Standards and the Corporations Act 2001. Superannuation funds must comply with disclosure requirements contained in the Accounting Standards.


All listed MIS (there are no listed superannuation funds) must comply with disclosure requirements contained within the Australian Stock Exchange’s (ASX) - Official Listing Rules, as well as additional disclosure requirement specifically for listed registered schemes included in the Corporations Act 2001.


Classes of units


Financial statements are required which incorporate all classes of units.


There is no requirement to produce financial statements for each class of units if they are all issued within the one legal entity.


back to top

1.2 Requirement to audit financial statements

MIS and superannution funds are required to have their annual financial report audited and obtain an auditor’s report. Disclosing entities must have their half-year financial report either audited or reviewed and obtain an auditor’s report or an auditor’s review report.


back to top

1.3 Publication of financial statements

MIS are required to lodge their annual financial reports with ASIC within three months after the end of the financial year. Superannuation funds must lodge a prescribed annual return of financial and other information with APRA within four months after the end of the financial year, together with a copy of the audit report on the superannuation fund’s annual financial report.


Disclosing entities required to prepare half-year financial reports, must lodge the reports with ASIC within 75 days after the end of the half-year.


MIS are required to provide members copies of the annual financial report, the directors’ report and auditor’s report on the financial report for the financial year within three months after the end of the financial year.


Superannuation funds are only required to provide members copies of the annual trustee report, which contain prescribed financial information. The report must be provided with six months of year end. Trustees are also required to provide members with a copy of the audited financial report of the superannuation funds upon receipt of a written request from the member.


back to top

1.4 Accounting standards

MIS and superannuation funds must prepare financial reports in accordance with Australian Accounting Standards as issued by the Australian Accounting Standards Board (AASB).


Superannuation funds must prepare financial reports in accordance with AAS 25 Financial Reporting by Superannuation Plans.


back to top

1.5 Contents of financial report

Requirements for inclusion in annual financial report of MIS


Required by AASB Complied with for best practice
Directors' report No Yes**
Income statement which includes all income less expenses plus realized and unrealized gains and losses Yes Yes
Statement of comprehensive income Yes Yes
Statement of financial position Yes Yes
Statement of changes in equity Yes Yes
Statement of cash flows Yes Yes
Statement of compliance with accounting standards Yes Yes
Statement of significant accounting policies Yes Yes
Segment reporting Yes* Yes*
Accounting estimates and judgments Yes Yes
Interest income Yes Yes
Gains and losses on debt and equity investments designated at fair value through profit and loss Yes Yes
Auditors' remuneration Yes Yes
Cash and cash equivalents Yes Yes
Investments Yes Yes
Balances due from/to broker Yes Yes
Distributions paid and payable Yes Yes
Reconciliation of cash flows from operating activities Yes Yes
Financial instruments Yes Yes
Related party transactions Yes Yes
Commitments and contigent assets and liabilities Yes Yes
Subsequent events Yes Yes
Changes in accounting policy Yes Yes

* Applicable to listed MIS only.


** Specific requirement of the Corporations Act.


The Corporations Act operates as a national act throughout all states and territories of Australia. The Act requires the financial report to include the financial statements and notes to the financial statements as required by the accounting standards. Therefore, by default all requirements listed above are required by law.


Requirements for inclusion in annual financial report of superannuation funds


Required by AASB Complied with for best practice
Operating statement/statement of changes in net assets Yes Yes
Statement of financial position/statement of net assets Yes Yes
Statement of cash flows Yes* Yes
Statement of significant accounting policies Yes Yes
Statement of compliance with accounting standards Yes Yes
Payables Yes Yes
General administration expenses Yes Yes
Investments Yes Yes
Movements in net market values** Yes Yes
Auditors' remuneration Yes Yes
Income tax expense Yes Yes
Deferred tax assets and liabilities Yes Yes
Liability for accrued benefits and funding arrangements Yes Yes
Vested benefits Yes Yes
Guaranteed benefits Yes Yes
Operating leases Yes Yes
Related party transactions Yes Yes
Investment manager Yes Yes
Additional financial instruments disclosure Yes Yes
Commitments and contingent assets and liabilities Yes Yes
Subsequent events Yes Yes
Changes in accounting policy Yes Yes

* Not required for Defined Benefit Superannuation Funds.


** Net market value as defined by AAS 25.


Accounting treatments


The following accounting treatments should be used in the preparation of the financial report for MIS:


Required by AASB Complied with for best practice
Acquisition costs of the fund manager are amortized over the life of the contract Yes Yes
Derivatives are shown on balance sheet and are stated at fair value Yes Yes
Financial instruments are valued at fair value Yes Yes
Transaction costs on initial acquisition of financial assets should be expenses as incurred in the income statement Yes Yes
Listed investments are measured at bid price Yes Yes
Unit holders' funds which meet the definition of a puttable instrument are classified as liabilities Yes Yes
Holdings in other registered schemes are consolidated if the scheme controls the underlying scheme* Yes Yes

The following accounting treatments should be used in the preparation of the financial report for superannuation funds:


Required by AASB Complied with for best practice
Derivatives are shown on balance sheet and are stated at net market value Yes Yes
Financial instruments are valued at net market value Yes Yes
Listed investments are measured at net market value Yes Yes
All other assets and liabilities are measured at net market value Yes Yes
Members' accrued benefits are classified as liabilities Yes Yes
Holdings in other registered schemes are consolidated if the scheme controls the underlying scheme* Yes Yes

* On 31 October 2012, the IASB issued amendments to IFRS 10 which provided consolidation relief for qualifying investment entities allowing them to account for investments in controlled investees at fair value through the profit and loss. IFRS 10 had an effective date of 1 January 2013. However, it cannot yet be adopted in Australia as the AASB has not approved the IASB guidance in Australia.


back to top

1.6 Appendix

Reference material


The following details relevant laws and regulations for schemes and provides web addresses where this material can be located.


Regulatory


Australian Securities and Investments Commission.


Australian Prudential Regulation Authority.


Australian Stock Exchange.


Law


Corporations Act 2001.


Superannuation Industry (Supervision) Act.


Australian Taxation Office.




© 2014 KPMG Australia Pty Limited, an Australian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

 

Share this

Share this

Contact

Tanya Gilerman

KPMG in Australia

+61 2 9335 8144

International funds and fund management survey

International hedge funds survey

The annual KPMG International Hedge Fund Survey looks at the taxation and regulation issues affecting hedge fund management.