New Disclosure Requirements for Public Companies

Transparency and clarity are paramount when it comes to stakeholders' disclosures. Recently, public companies preparing accounts for periods beginning 30 June 2024 found themselves facing an unexpected addition to their compliance obligations: a new disclosure requirement mandated by the Corporations Act 2001.

This requirement can be traced back to October 2022, when the Federal Government announced tax reforms for multinational companies. Among these reforms was an amendment to the Corporations Act, ratified by Parliament on 27 March 2024. This amendment now mandates that public companies in Australia must include specific information about entities consolidated into their financial statements. These entities are those controlled by the parent entity, per the definition of control under the Australian Accounting Standards.

The following essential information below will help you better understand these new disclosure requirements.

Who does this apply to?

This requirement applies to all public companies, both listed and unlisted, that are obligated to prepare financial statements under Chapter 2M of the Corporations Act 2001. Not-for-profit (NFP) public companies registered with the Australian Charities and Not-for-profit Commission (ACNC) are exempt from this mandate.

However, NFP public companies not registered with the ACNC should verify whether they are required to prepare financial statements following Chapter 2M.

Effective date and disclosure requirements

For annual reporting periods beginning on or after 1 July 2023 (i.e., from 30 June 2024 financial statements), public companies subject to Chapter 2M reporting must disclose specific information for each entity included in the consolidated group. These disclosures include:

the entity’s name (if any) at that time
whether, at that time, the entity was:
- a body corporate,
- partnership, or
- trust;
whether, at that time, the entity was a:
- trustee of a trust within the consolidated entity,
- partner in a partnership within the consolidated entity, or
- participant in a joint venture within the consolidated entity;
if the entity is a body corporate—the place at which the entity was incorporated or formed;
if the entity is a body corporate with a share capital— the percentage of the entity’s issued share capital (excluding any part that carries no right to participate beyond a specified amount in a distribution of either profits or capital) that was held, directly or indirectly, by the public company at that time;
whether, at that time, the entity was:
- an Australian resident (within the meaning of the Income Tax Assessment Act 1997) or
- a foreign resident (within the meaning of that Act);
If the entity was a foreign resident for tax purposes, a list of each foreign jurisdiction in which the entity was a resident at that time for the law of the foreign jurisdiction relating to foreign income tax.

Audit and additional declarations

These disclosures form part of the financial statement notes and are subject to audit. Furthermore, directors of all companies are required to declare the accuracy of the consolidated entity disclosure statement, with listed companies mandating similar declarations from the CEO and CFO.

While the term 'true and correct' is not commonly used in financial reporting, it is required as part of these declarations.

Integration and compliance

It's noteworthy that these disclosures are supplementary to existing requirements under Australian Accounting Standards and are not intended to replace any existing disclosures, such as those outlined in AASB 12. In cases where no controlled entities exist, a statement to that effect is necessary.

New Disclosure Mandate for Public Companies