General directions and notesGeneral directions and notes

Reporting Form ARF 322.0

Statement of Financial Position (Consolidated)

Instruction Guide

General directions and notes

Reporting entity

This is to be completed by all authorised deposit-taking institutions (ADIs) on a consolidated group basis (where applicable).

The basis of consolidation required in this form is in accordance with the accounting consolidated group. The accounting consolidated group is to be determined in accordance with the requirements of the Australian accounting standards, notably AASB 127 Consolidated and Separate Financial Statements (AASB 127) and AASB 3 Business Combinations (AASB 3).

ADIs that do not have any controlled entities are not required to submit forms for this reporting entity.

Branches of foreign banks are not required to complete this form.

Consolidated ADI group

This refers to the global operations of the ADI and all its controlled entities (where relevant), consolidated in accordance with Australian accounting standards (AASB 127 and AASB 3).

‘Controlled entity’, ‘parent entity’. These terms are defined in accordance with AASB 127 and AASB 3.

Exclude from the accounting consolidated group special purpose vehicles (SPVs) whose assets have satisfied the clean sale requirements set down in Prudential Standard APS 120 Securitisation (APS 120) (refer to Securitisation Deconsolidation Principle below).

Securitisation deconsolidation principle

Except as otherwise specified in these instructions, the following applies:

1. Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that meets APRA’s operational requirements for regulatory capital relief under APS 120:

(a) special purpose vehicles (SPVs) holding securitised assets may be treated as non-consolidated independent third parties for regulatory reporting purposes, irrespective of whether the SPVs (or their assets) are consolidated for accounting purposes;

(b) the assets, liabilities, revenues and expenses of the relevant SPVs may be excluded from the ADI’s reported amounts in APRA’s regulatory reporting returns; and

(c) the underlying exposures (i.e. the pool) under such a securitisation may be excluded from the calculation of the ADI’s regulatory capital (refer to APS 120). However, the ADI must still hold regulatory capital for the securitisation exposures[2] that it retains or acquires and such exposures are to be reported in Reporting Form ARF 120.1 Securitisation – Regulatory Capital. The risk-weighted assets (RWA) relating to such securitisation exposures must also be reported in Reporting Form ARF 110.0.1 Capital Adequacy (Level 1) and Reporting Form ARF 110.0.2 Capital Adequacy (Level 2).

2. Where an ADI (or a member of its Level 2 consolidated group) participates in a securitisation that does not meet APRA’s operational requirements for regulatory capital relief under APS 120, or the ADI undertakes a funding-only securitisation or synthetic securitisation, such assets are to be reported as on-balance sheet in APRA’s regulatory reporting returns.

Reporting period

The form is to be completed as at the last day of the stated reporting quarter (i.e. September, December, March and June). Australia-owned banks, foreign subsidiary banks and other ADIs must submit the completed form to APRA within 25 business days after the end of the relevant reporting quarter. Credit Unions, Cairns Penny Savings & Loans Limited, and Building Societies must submit the completed form to APRA within 15 business days after the end of the relevant reporting quarter.

Unit of measurement

Australia-owned banks and foreign subsidiary banks are asked to complete the form in millions of Australian dollars rounded to one decimal place. Other ADIs, Building Societies, Credit Unions, and Cairns Penny Savings & Loans Limited are asked to complete the form in whole Australian dollars (no decimal place).

Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates (AASB 121).

The general requirements of AASB 121 for translation are:

1. foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date;[3]
2. foreign currency non-monetary items that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction;[4]
3. foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 Financial Instruments: Recognition and Measurement (AASB 139), AASB 7 Financial Instruments: Disclosure (AASB 7) and AASB 132 Financial Instruments: Disclosure and Presentation. However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post-acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss; and

4. translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

• Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
• Translation of financial reports should otherwise follow the requirements in AASB 121.

Netting

Unless otherwise specifically stated, institutions are allowed to take advantage of netting agreements in relation to disclosure of data items in this form. Institutions are to comply with the prerequisite for netting outlined in Australian accounting standards AASB 139, AASB 7, and AASB 132 Financial Instruments: Disclosure and Presentation and any relevant prudential standards.

Term to maturity

Any references to ‘term to maturity’ in Reporting Form ARF 322.0 Statement of Financial Position (Consolidated) (ARF 322.0) refer to residual term to maturity.

Basis of preparation

The nature of the disclosure and format of this form may not be strictly consistent with the annual financial statements prepared by the institution. Notwithstanding this, in completing this form (unless otherwise specifically stated for individual items of assets, liabilities or equity), institutions are requested to follow the basis that is used for the preparation of its annual financial statements in accordance with the Australian accounting standards, specifically in regard to the:

• interpretation/definition of specific asset, liability and equity items;
• appropriate measurement basis for asset, liability and equity items; and
• netting of financial assets and financial liabilities.

If additional clarification is required for specific asset, liability or equity items in ARF 322.0, reference should be made to the instructions provided for ARF 320.0 Statement of Financial Position (Domestic Books), ARF 321.0 Statement of Financial Position (Offshore Operations) and ARF 323.0 Statement of Financial Position (Licensed ADI) as appropriate.

Specific instructions

Section D: Additional information required by APRA

1. to 5.

Provide a summary of financial assets and liabilities balances categorised in accordance with AASB 139.

In item 1, financial assets available-for-sale include as part of loans and advances those “tainted” held-to-maturity investments that can no longer be classified as held-to-maturity investments.

6. Reconciliation of loan loss provisions

This section reconciles the amounts disclosed as loan loss provisions under International Financial Reporting Standards[5] with APRA reporting on a gross basis. Parts of the Specific Provisions and General Reserve for Credit Losses (as defined by Prudential Standard APS 220 Credit Quality) may have come only from collective provisions or may have been created only for prudential purposes.