Annual reporting
The financial report
Small corporations with income of $100,000 or more, and all medium and large corporations, must lodge a financial report each year. It contains financial statements, notes to those statements, and a directors’ declaration.
Who lodges one
What the Act says
“Your corporation must prepare and lodge a financial report each year if its size is small and it has a consolidated gross operating income (CGOI) of $100,000 or more, size is medium, or size is large.”
What that means
Only one group is excused: small corporations under $100,000.
If you are registered medium or large, income does not come into it. That is why knowing your registered size matters more than knowing your turnover.
Checked against ORIC — Financial reports, .
What it has to contain
- Financial statements for the year
- Notes to the financial statements
- A directors’ declaration
Corporations required to prepare a financial report must prepare one that includes statements and notes complying with the Australian Accounting Standards as if it were a reporting entity. That phrase carries more weight than it looks.
Checked against ORIC — Corporation reporting guide (June 2020), .
“Reporting entity”, and why it probably means you
A reporting entity is one where people exist who have an interest in the corporation but cannot obtain financial information about it on their own, so they depend on the published accounts.
The Registrar’s guide makes the point plainly: in most CATSI corporations, the fact that grants are provided and creditors have an interest implies they are likely to be reporting entities. Funders and creditors are exactly the people who cannot get the numbers any other way.
The practical consequence is that general purpose financial statements, the proper ones prepared to the standards, are usually what is required. Special purpose statements adhere to a few basic standards, often do not comply fully, and are typically what people mean by management accounts. Lodging those where general purpose statements were needed is a real and fairly common problem.
Simplified disclosure may be available
Many CATSI corporations may be eligible to apply tier 2 reduced disclosure, under AASB 1053 and AASB 1060. That can meaningfully shorten the notes without dropping to special purpose statements.
Whether it suits your corporation is a judgement for whoever prepares the accounts, and the Registrar’s own guide is explicit that readers should seek their own professional advice on applying AASB 1053.
Related parties: the disclosure boards underestimate
AASB 124 related party disclosures apply, and in a corporation where directors are also community members this reaches further than people expect.
A person is a related party if they control or jointly control the corporation, have significant influence over it, or are key management personnel, and that extends to their close family, including a spouse or domestic partner and their children or dependants. Entities in the same group, and associates or joint ventures, are related parties too.
None of that makes such transactions wrong. It makes them disclosable, and the failure mode is a board that did nothing improper but did not disclose, which then looks worse than it was.
Where it fits
The financial report is what an audit gives an opinion on, so the two travel together. Everyone also lodges a general report, and larger corporations add a directors’ report.
We prepare financial reports and work alongside your auditor. We are never the auditor ourselves. How to find one.
Frequently asked questions
Who has to lodge a financial report?
Small corporations with consolidated gross operating income of $100,000 or more, and all medium and large corporations. Small corporations with income under $100,000 do not have to lodge one.
What has to be in it?
Financial statements for the year, notes to those statements, and a directors’ declaration. Corporations required to prepare a financial report must prepare one that includes financial statements and notes complying with the Australian Accounting Standards as if it were a reporting entity.
What is a "reporting entity" and are we one?
A reporting entity is one where people exist who have an interest in the corporation but cannot get financial information about it on their own — so they rely on the published accounts. The Registrar’s guide notes that in most CATSI corporations the fact that grants are provided and creditors have an interest implies they are likely to be reporting entities.
Can we use simplified disclosures?
Possibly. Many CATSI corporations may be eligible to apply tier 2 reduced disclosure under AASB 1053 and AASB 1060. Whether it suits your corporation is a judgement for whoever prepares the accounts, and the Registrar’s own guide encourages seeking professional advice on it.
Do we have to disclose payments to directors and their families?
Related party disclosures under AASB 124 apply, and they reach further than boards expect — a director’s close family members can be related parties, as can entities the director controls or has significant influence over. In corporations where directors are also community members doing business with the corporation, this needs care rather than assumption.