The story you tell in your disclosure needs to be specific to your council
Councils need to ensure the story told in the financial statements is current, uses the best information council has available at the time and provides a complete story. This will enable users of the financial statements to read the disclosures and have an understanding of the impact of COVID-19 on their council.
The increased uncertainty in the current environment means that clear, informative and
transparent disclosure is essential for material items in council financial statements at 30 June 2020. In assessing materiality of disclosures, it is important to consider the information expectations of users of financial statements. If users could reasonably expect that COVID-19 has a significant impact on council, an explanation of the impact (or lack of impact) should be provided.
Financial statement disclosures should be:
- Useful and meaningful
- Sufficiently specific to the circumstances affecting the council
- Clear, concise and effective.
Assumptions and judgements:
- Management/Audit Committees and councilors should have a reasonable basis for each significant estimate in the financial report as well as the going concern assessment
- Key assumptions should be appropriately challenged by the Audit Committee and councilors and auditors.
Model financial statements are unable to provide example disclosures for councils since the individual council impact will differ significantly councils should therefore describe the effect of COVID-19 on their specific operations, transactions and balances.
In preparing your council disclosures, think about:
- Key assumptions in compiling your financial statements given the level of uncertainties in existence – e.g. how long have you assumed that COVID-19 will last on different aspects of your operations?
- What has changed in your business operations over the last few months?
- Critical estimates and judgements note – what else should be included in your AASB 101 estimates and judgements note specific to council?
- The accuracy of statements being made regarding the impact of COVID-19, councils should not use COVID-19 as a ‘blanket’ rationale for all bad news.
- Providing sufficient information without overcomplicating disclosures with too much detail or providing ‘what-if’ scenarios for if COVID-19 had not impacted council.
Last updated: Monday, Nov 30, 2020