ASIC changes to allow for certain AFS licensees to use lease assets to fulfil their licence financial requirements

From 28 April 2021, changes have been made to the financial requirements for some types of Australian Financial Services (AFS) licensees relating to the treatment of leased assets.

Following the mandatory adoption of the new accounting standard AASB 16 Leases (AASB 16) required from 1 January 2019, leases are to be reflected on the balance sheet of a lessee by way of a lease liability and a corresponding right-of-use asset.

ASIC had previously viewed Right of Use assets as Intangible Assets, meaning that after adoption of the new standard these lessees now had to include their lease liabilities when calculating their Net Tangible Asset (NTA), Surplus Liquid Funds (SLF), or Adjusted Surplus Liquid Funds (ASLF) financial ratios, but needed to exclude the corresponding right-of-use assets. This resulted in some AFS licensees facing difficulty in satisfying their financial requirements because of a decrease in net tangible assets despite no ultimate change to their cash flows or business structure.

In July 2020, ASIC issued a temporary no-action position in relation to potential breaches of the financial requirements that arose from changes to the accounting treatment of leased assets. From 28 April 2021, legislative instruments have been issued to alter the financial requirements to allow those affected AFS licensees to include right-of-use assets in the calculation of their Net Tangible Assets, and where the right-of-use asset is a current asset, Surplus Liquid Funds and Adjusted Surplus Liquid Funds. 

Contact your usual Mazars adviser, the author or speak to one of our audit specialists via the form below or on:

 

Brisbane – Michael Georghiou

Melbourne –Greg Hudswell

Sydney – James Martin

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166

Author: Anna Budilov

* mandatory fields

Your personal data is collected by Mazars in Australia, the data controller, in accordance with applicable laws and regulations. Fields marked with an asterisk are required. If any required field is left blank, it will not be possible to process your request. Your personal data is collected for the purpose of processing your request.

You have a right to access, correct and erase your data, and a right to object to or limit the processing of your data. You also have a right to data portability and the right to provide guidance on what happens to your data after your death. Finally, you have the right to lodge a complaint with a supervisory authority and a right not to be the subject of a decision based exclusively on automated processing, including profiling, that produces legal effects concerning you or significantly affects you in a similar way.

Published: 07/07/2021

 

All rights reserved. This publication in whole or in part may not be reproduced, distributed or used in any manner whatsoever without the express prior and written consent of Mazars, except for the use of brief quotations in the press, in social media or in another communication tool, as long as Mazars and the source of the publication are duly mentioned. In all cases, Mazars’ intellectual property rights are protected and the Mazars Group shall not be liable for any use of this publication by third parties, either with or without Mazars’ prior authorisation. Also please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.