The firm noted there is an expectation of “carnage” in the financial services industry as AFSL licensee holders, looking to manage costs of compliance introduced by the new General Purpose framework, en masse retire their own licences and seek a Corporate Trusted Representative (CAR).

This will mean a corporatising of the responsibility for policing AFSL compliance effectively farmed out to these “super AFSLs”, rather than having a direct relationship between licensee and ASIC.

Many licensees are also now actively weighing up their options but are yet to have full visibility about what ASIC’s approach will be.

Nicholas Benbow, director, audit and assurance, at William Buck, said that ASIC will need to address the issue quickly, as the issue is becoming increasingly urgent for affected licensees.

“ASIC needs to address the impact of AASB 2020-2 on AFSL licensees as presently the Form 71 which auditors attach to a licensee’s disclosures under s.989B refers to the current status quo — that’s reporting and non-reporting entities,” Mr Benbow said.

“It’s becoming more and more urgent for ASIC to pass comment and the Form 71 will soon be rendered obsolete.

“Extra compliance will fall onto licensees because the AASB has made it clear that AFSL licensees fall within the scope of AASB 2020-2 Amendments to Australian Accounting Standards, which has ended the usage of Special Purpose Financial Reports by entities that report to ASIC, which are currently and mostly self-designated as non-reporting entities under Australian Accounting Standards.”

There also needs to be consideration that under s.989B of the Corporations Act, the annual financial reporting requirements of AFSL licensees to ASIC consist only of an audited balance sheet and profit and loss statement, according to Mr Benbow.

“So, over 6,000 AFSL licensees will face elevated reporting and auditing requirements under the General Purpose framework, with disclosure obligations not too far removed from those required by ASX-listed entities,” he added.

While the changes will affect various advisers, for SMSFs that are set up after 1 July 2021 and wish to prepare SPFS, the fund will also need to ensure they don’t have a clause in their trust deeds that require their financial statements be prepared in accordance with the AASB.