Changes to financial reporting relief for wholly-owned entities

THE Australian Securities and Investments Commission has released changes to the wholly-owned entities financial reporting relief under class order [CO 98/1418] Wholly-owned entities. Under this class order, certain wholly-owned entities may be relieved from the requirement to prepare and lodge financial reports under chapter 2M of the Corporations Act 2001, when they enter into deeds of cross guarantee with their parent entity and meet certain conditions. The main changes to [CO 98/1418] and related pro forma deeds are: • in relation to the certificate by a legal practioner that is required to be lodged with new deeds of cross guarantee, and with assumption deeds joining a company to an existing deed of cross guarantee, the opinion concerning proper execution of the deed and whether the deed is binding and enforceable on all parties, can now be made ‘after having made such enquiries as were reasonable in the circumstances.’; • the certificate by a legal practitioner or registered company auditor that is required to be lodged with new deeds of cross guarantee, now caters for the different financial reporting requirements for holding entities that are registered foreign companies; and • the class order has been updated for the Australian equivalents of International Financial Reporting Standards, which will apply for financial years commencing on or after January 1, 2005. Entities entering into new deeds of cross guarantee and assumption deeds will need to be particularly mindful of the changes, as these changes impact on the wording of both the deeds and the relevant certificates. For financial years commencing on or after January 1, 2005, the financial information required to be included in the notes to the holding entity’s consolidated financial statements in relation to the ‘closed group’ and parties to the deed of cross guarantee, must comply with relevant requirement of the new accounting standards. In addition, companies will need to have regard to the changed format requirements for financial statements under new standards. More information is available from www.asic.gov.au/co