AFS Licensees are subject to financial condition requirements

ASIC recently announced that right-of-use assets are intangible for the purpose of calculating net tangible assets (NTA) requirements for Australian Financial Services Licensees (AFS).
 
Many Australian Financial Services Licensees are subject to financial condition requirements that may be affected by the new standards. For example, net tangible assets requirement would include lease liabilities, but not right-of-use assets.
 
This might be seen by some as an accounting interpretation issued by ASIC and has the potential to reach far beyond AFS license holders. For instance, ASX listing rule 19 relies on intangible assets being measured in accordance with accounting standards when calculating a company’s NTA.
 
Full year reports at 31 December 2019 are to comply with a new accounting standard on lease accounting that requires lessees to recognise lease liabilities and a right-of-use asset for all leases, not just leases formerly classified as finance leases. Some leases and similar arrangements are covered by other accounting standards such as mining leases and leases of biological assets.
 
Directors and auditors of AFS licensees are to ensure they report any breaches of financial condition requirements to ASIC as required by the Corporations Act 2001. As the financial condition requirements are on an ‘at all time’ basis, compliance needs to be considered from the commencement of the financial year to which the standard first applied.
 
Australian Financial Services (AFS) Licensees who have not yet updated their Financial Advisers Register are reminded by ASIC to add their new details about their financial advisers by 1 January 2020. AFS licensees are encouraged to do their reporting as soon as possible as ASIC offices will be closed between Christmas eve and the end of the year.

For further assistance and to find out more, visit ASIC's website, or contact us to discuss how we can help you.