ASIC amends AFSL obligations

AFS licensees are required to maintain adequate financial resources to provide services under the terms of their licences – but ASIC has taken a no-action position on the use of right-of-lease assets to satisfy those requirements.

“ASIC recognises that some AFS licensees may face difficulty in complying with their financial resource requirements because, following changes to the accounting standards for leases, lessees are required to recognise lease liabilities and a right-of-use asset for all leases,” ASIC said in a statement.

“While the lease liabilities are taken into account for the purposes of an AFS licensee’s financial resource requirements, the right-of-use assets are now generally treated as intangible assets and do not count towards meeting those requirements.”

The temporary no-action position will allow licensees to use right-of-use lease assets to count towards their financial resource requirements and will not take regulatory action against licensees in relation to past breaches of financial resource requirements when the breach arises from right-of-use lease assets not being able to be counted towards meeting those requirements.

ASIC will consult on the changes in the 2020-21 financial year.