Breathing space

As directors approach the end of financial year on 30 June, ASIC is offering up to four-month extensions for AGM financial reporting, advises ASIC executive director, markets Greg Yanco.

What’s a month or two after the year we’ve just had? It’s a question that the average person might ask following the decision of the Australian Securities and Investments Commission (ASIC) to extend important deadlines for entities this calendar year. The answer is “plenty”, especially if you’re a medium-sized company struggling to have your financial reports signed off and lodged in time. Or, if as a result of that, you won’t be able to hold your annual general meeting (AGM) with the required period for members and potential investors to consider how well you’re travelling.

The relief will cover listed and unlisted entities whose balance dates range from 23 June to 7 July 2021 — the overwhelming majority. They will have one extra month to lodge financial reports, which means that all listed entities, unlisted disclosing entities and unlisted registered schemes with a balance date of 30 June will have four months to lodge their full-year accounts. The deadline for other non-listed entities will be extended from four to five months. Similar extensions are already in place for entities with a balance date of 31 December 2020.

The extensions do not apply for reporting for balance dates from 8 January to 22 June 2021. There does not appear to be a general lack of resources to meet financial reporting and audit obligations on time for these reporting periods. However, ASIC will consider relief on a case-by-case basis, where appropriate.

In line with this, the commission will adopt a “no action” position in favour of companies that are required to hold their annual meetings within five months of their year-end, allowing them an additional two months to hold their AGM for year-ends up to 7 July 2021. Where companies have delayed their financial report, this will give shareholders sufficient time to consider that report before the AGM.

None of these relief measures will apply to registered foreign companies.

Taking the pressure off

The rationale for the extensions is entirely practical. The extension will assist with easing any pressures on resources for the audits of smaller entities and provide adequate time for the completion of the audit process, taking into account the challenges presented by COVID-19 conditions. Factors that might affect audit firm resources could include restrictions on travel into Australia and increased staff turnover.

While the extra time is open to them, larger ASX-listed companies are not expected to be affected. But it is important, and potentially very useful, for some smaller — probably unlisted — companies to allow their auditors to stagger their considerable overall workload.

Directors will need to consider the information needs of shareholders and other users of their financial reports, not forgetting any borrowing covenants or other obligations, when deciding whether to delay.

Importantly, for those following the ASX’s leading players as indicators of market direction, the deadlines for listed entities to provide their preliminary final reports are unchanged. Such reports can be unaudited. Listed entities will be required to inform the market when they rely on the extended period for lodgement. The chair or board may also find it desirable to explain the reasons behind any departure from the timetable.

Shareholders and the community in general have demonstrated their preparedness to understand the challenges faced (and usually overcome) time and again during the past year. In this instance, we would expect the same understanding — and appreciation — of the value of information.