Financial Sector (Collection of Data) (reporting standard) determination No. 57 of 2006 - Reporting Standard RRS 391.0 - Commercial Finance

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Legislation au F2006L02082 Not in force Legislative Instrument

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Financial Sector (Collection of Data) (reporting standard) determinations Nos. 44 - 60 of 2006

 

 

EXPLANATORY STATEMENT

 

Prepared by the Australian Prudential Regulation Authority (APRA)

Issued by the authority of APRA

 

Financial Sector (Collection of Data) Act 2001 (the Act), paragraph 13(1)(a)

 

Acts Interpretation Act 1901, subsection 33(3)

 

 

Under paragraph 13(1)(a) of the Act, APRA may, by writing, determine reporting standards with which financial sector entities must comply.  Such standards relate to reporting financial or accounting data and other information regarding the business or activities of the entities.  Subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to issue an instrument the power shall, unless the contrary intention appears, be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to amend or vary any such instrument.

 

Financial Sector (Collection of Data) (reporting standard) determinations Nos. 44 - 60 of 2006 (the instruments) revoke and replace the reporting standards outlined below in respect of Registered Financial Corporations (RFCs):

 

RRS 231.1a   International Exposures: Locational (Assets) Part 1

RRS 231.1b   International Exposures: Locational (Liabilities) Part 1

RRS 231.2     International Exposures: Locational Part 2

RRS 231.3a International Exposures: Consolidated (Domestic Entity)

RRS 231.3b International Exposures: Consolidated (Foreign Entity)

RRS 320.0    Statement of Financial Position

RRS 320.1   Debt Securities Held

RRS 320.2   Equity Securities Held

RRS 320.3   Debt Securities on Issue

RRS 320.4   Bill Acceptances

RRS 320.5 Securities Subject to Repurchase and Resale and Stock Lending and Borrowing

RRS 331.0    Selected Revenues and Expenses

RRS 332.0   Statement of Economic Activity

RRS 391.0   Commercial Finance

RRS 392.0   Housing Finance

RRS 393.0   Lease Finance

RRS 394.0   Personal Finance

 

Under subsection 15(1) of the Act, APRA has determined that the instruments will come into force on 1 July 2006.

 

  1.    Background

 

This Explanatory Statement explains the changes being made by APRA to the reporting framework for RFCs in response to Australian equivalents to international financial reporting standards (AIFRS). RFCs have adopted AIFRS for reporting periods beginning on or after 1 January 2005.

 

Each reporting standard comprises: (1) the body of the reporting standard itself (which contains details about inter alia when returns under the standards must be lodged with APRA); (2) one or more reporting forms which must be completed by RFCs covered by the reporting standard; and (3) a set of detailed technical instructions regarding completion of the form.

 

The changes to Australian accounting standards that flow from the adoption of AIFRS, automatically flow through to APRA’s reporting framework. APRA’s objective in its approach to AIFRS is to align its reporting  standards with Australian accounting standards and principles to the extent practicable, as the latter provide a widely accepted basis for the recognition and measurement of assets, liabilities, equity, revenue and expenses.

 

2.      Purpose of the instruments

The purpose of the instrument is to revoke those reporting standards, applying to RFCs, whose operation is affected by AIFRS and to replace them with corresponding standards which incorporate appropriate adjustments (new standards).  APRA considered that it would be clearer and more effective to consolidate the necessary changes within new standards.  For that reason, APRA decided to revoke and replace affected reporting standards rather than to amend them. The reporting standards affected by AIFRS are RRS 320.0 Statement of Financial Position and RRS 331.0 Selected Revenues and Expenses. APRA has also taken this opportunity to update the formatting of instructions attaching to all RFC reporting standards. Therefore, APRA has revoked all RFC reporting standards and redetermined them.

 

3.      Operation of the instruments

 

The instruments determine the new standards.

 

There have been no material changes to the reporting standards themselves, only to the forms and instructions. References to accounting standards and Australian Accounting Standards Board (AASB) standards in the instructions have been updated to AIFRS accounting standards. Accordingly, AIFRS must be applied by RFCs, where instructed, when completing forms under the new standards.

 

The forms and instructions have also been updated for the accounting presentation changes that flowed from AIFRS. A more detailed summary of the changes follows:

 

RRS 231.1, RRS 231.2, RRS 231.3 International Exposures

 

These reporting standards collect information from Australian-resident RFCs on their international exposures and satisfy Australia’s obligation to the Bank for International Settlements (BIS) in providing aggregate international banking statistics for Australia.

 

The changes to these standards are for the purposes of updating references as they relate to the new accounting standards and to ensure consistency with AIFRS terminology. There have also been minor changes to update the formatting of the documents and minor drafting changes to ensure consistency between different reporting standards.

 

RRS 320.0 Statement of Financial Position

 

This reporting standard requires all RFCs with assets equal to or greater than $50 million to provide a statement of financial position to APRA each month. A number of changes have been made including the need for RFCs to ensure that derivative instruments and defined benefit assets and liabilities are recognised on their balance sheets. Intangible assets will also be required to be treated differently. Goodwill which was previously amortised will now have to be tested for impairment on an annual basis. There have also been changes to ensure consistency with AIFRS terminology and to update the formatting of the document and minor drafting changes to ensure consistency between different reporting standards.

 

RRS 331.0 Selected Revenues and Expenses

 

This reporting standard requires RFCs that have total assets equal to or greater than $500 million to report selected revenues and expenses on a quarterly basis. RFCs will be required to report gains losses on derivative instruments whereas previously such losses were not required to be disclosed. There have  also been minor changes to update the formatting of the document and minor drafting changes to ensure consistency between different reporting standards.

 

All other Reporting Standards listed in the instruments

 

There have been no changes to the other reporting standards other than to update the formatting of the reporting standards and instruction guides and minor drafting changes to ensure consistency between different reporting standards.  These changes do not affect the content of the reporting standards or instruction guides.

 

4.      Consultation

 

Industry wide consultation has been held over a 12-month period with RFCs. APRA also consulted the Reserve Bank of Australia (RBA) and Australian Bureau of Statistics (ABS) when developing the AIFRS regulatory reports. Feedback received has been incorporated within the final set of reports.

 

5.      Regulation Impact Statement

 

The Office of Regulation Review has advised that a RIS is not required for the amendments to the reporting standards. 

Overview

The Financial Sector (Collection of Data) (reporting standard) determinations Nos. 44 - 60 of 2006 were issued by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001 to address the need for updating the reporting standards for Registered Financial Corporations (RFCs) in alignment with the Australian equivalents to international financial reporting standards (AIFRS). These determinations aim to ensure that the reporting standards reflect the changes brought about by the adoption of AIFRS, thereby aligning APRA's reporting framework with Australian accounting standards and principles. The determinations revoke and replace existing reporting standards with new ones that incorporate necessary adjustments, including updates to accounting standards references and terminology consistency with AIFRS. This change ensures that RFCs comply with the updated requirements when completing forms under the new standards. The determinations were developed following industry-wide consultation with RFCs and consultations with the Reserve Bank of Australia and the Australian Bureau of Statistics. The Office of Regulation Review determined that a Regulation Impact Statement was not necessary for these amendments, highlighting the minimal impact on the content of the reporting standards and instruction guides, with changes primarily focusing on formatting and minor drafting adjustments for consistency and clarity.

Scope and Application

The Financial Sector (Collection of Data) (Reporting Standard) Determinations Nos. 44 - 60 of 2006 apply to financial sector entities in Australia, specifically Registered Financial Corporations (RFCs) that must comply with the reporting standards established by the Australian Prudential Regulation Authority (APRA). These determinations, made under the Financial Sector (Collection of Data) Act 2001, outline new reporting standards that RFCs must adhere to when providing financial and accounting data to APRA. The standards encompass various aspects of financial reporting, including international exposures, statements of financial position, and selected revenues and expenses, among others. The changes are largely in response to the adoption of Australian equivalents to international financial reporting standards (AIFRS), ensuring that RFCs align their reporting practices with these new accounting standards. The new standards replace the previous ones to provide clarity and ensure consistency, with updates to the forms and instructions to reflect AIFRS requirements. The new determinations will come into force on 1 July 2006. APRA has undertaken extensive consultations with RFCs, the Reserve Bank of Australia (RBA), and the Australian Bureau of Statistics (ABS) during the development of these standards, incorporating feedback into the final determinations. The scope of these determinations is national, as they pertain to financial sector entities operating within Australia and governed by APRA. The geographic reach is thus limited to the Commonwealth of Australia, with the standards applying uniformly across the country. There are no stated exclusions or exemptions within these determinations, although specific thresholds apply for certain reporting requirements. For instance, RFCs with assets equal to or greater than $50 million are required to provide a statement of financial position to APRA each month, while those with total assets of $500 million or more must report selected revenues and expenses on a quarterly basis. The Act empowers APRA to amend or vary these instruments as necessary, ensuring that the reporting standards remain aligned with evolving accounting standards and regulatory needs.

Key Provisions

The Financial Sector (Collection of Data) (reporting standard) determinations Nos. 44 - 60 of 2006 (instruments) establish new reporting standards for Registered Financial Corporations (RFCs) to comply with Australian equivalents to international financial reporting standards (AIFRS). These instruments revoke and replace the previously existing reporting standards (section 1) to align with the new accounting standards. The primary focus is on updating references to AIFRS within the reporting forms and instructions to ensure consistency and compliance with the updated standards. The instruments impose several obligations on RFCs, the most significant of which is the requirement to apply AIFRS when completing the forms under the new standards (section 2). RFCs must ensure that derivative instruments and defined benefit assets and liabilities are recognised on their balance sheets, and intangible assets are treated differently. Goodwill, previously amortised, now needs to be tested for impairment annually. Additionally, RFCs with assets equal to or greater than $50 million are required to provide a statement of financial position to APRA monthly, and those with total assets equal to or greater than $500 million must report selected revenues and expenses quarterly. The instruments do not explicitly state any specific offences, penalties, or consequences for non-compliance. However, failure to comply with APRA's reporting standards can lead to regulatory actions under the Financial Sector (Collection of Data) Act 2001. Non-compliance may result in enforcement actions, fines, or other penalties imposed by APRA, as the authority has broad powers to ensure compliance with its determinations. The exact penalties would depend on the nature and severity of the breach, but they can include civil or criminal sanctions as deemed appropriate by APRA. Overall, the instruments aim to ensure that RFCs accurately report their financial data in accordance with the updated AIFRS, thereby maintaining the integrity and reliability of the financial information collected by APRA. The changes focus primarily on updating the reporting forms and instructions to reflect the new accounting standards, ensuring consistency, and aligning with international reporting practices.

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