01 July 2021

Changes to financial reporting for securitisation trusts

This article was written by Briana Bentley

From 1 July 2021 securitisation trusts that undertake to prepare financial reports in accordance with Australian accounting standards will have to prepare general purpose financial statements.

AASB 2020-1 Removal of Special Purpose Financial Statements for Certain For-Profit Private Sector Entities abolished the option for many entities to prepare special purpose finance statements so that entities that are obliged (whether by law, regulation or a contractual undertaking) to prepare financial reports in accordance with Australian accounting standards must now prepare general purpose financial statements.

Is my trust affected?

Securitisation trusts are not typically obliged under the Corporations Act to prepare financial reports.  It is common however for securitisation transaction documents to include a contractual undertaking by the manager or trustee to prepare financial reports for the trust, or a representation that financial reports for the trust have been prepared, in accordance with Australian accounting standards or accounting principles and practices generally accepted in Australia.

Previously, a securitisation trust could prepare a special purpose finance statement in compliance with such an undertaking.  General purpose finance statements are longer and more onerous to prepare (and therefore more costly to prepare and audit), and contain a level of detail not necessarily needed for a securitisation trust.

Existing transactions are grandfathered from the changes introduced by AASB 2020-1, but the obligation to prepare general purpose finance statements will apply to all documents entered into or amended from 1 July 2021 for annual reporting periods beginning on or after 1 July 2021.

What next?

If you are documenting a new transaction or amending (including extending) an existing transaction on and from 1 July 2021, check the undertakings and representations with respect to financial reporting.

Consider changing references to accounting standards or principles to instead undertake to prepare financial reports which reflect the cashflows and asset and liability position of the trust, and give a true and fair view of the financial condition of the trust.  If there is a requirement for audited reports, talk to your auditors in advance about the basis for preparation and audit of the financial reports, and which disclosure standards will be complied with, and do not represent that special purpose financial statements have been prepared in accordance with Australian accounting standards.

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