Large proprietary limited – are you one? Tips and traps for your assessment.

In Australia, being classified as a large proprietary limited company means that you have to prepare, and lodge audited financial statements with ASIC under the Corporations Act 2001 (the Act), however many companies are not necessarily applying the thresholds appropriately.

A proprietary company is large if it meets at least 2 of the following thresholds:

• Consolidated revenue ≥ $50 million
• Consolidated gross assets ≥ $25 million
• 100 or more employees.

These thresholds seem simple, however some points to note:

• The calculations must be performed applying ALL accounting standards so even if you are preparing special purpose financial statements, then you will need to assess these thresholds as if you were applying all standards, including:
• AASB 16 Leases – this standard would add a right of use asset to your balance sheet potentially significantly increasing your gross assets.
• AASB 10 Consolidated Financial Statements – if you have controlled entities then the inclusion of their income statement and balance sheet may significantly increase each of the thresholds.
• AASB 128 Investments in Associates and Joint Ventures / AASB 11 Joint Arrangements – if you have entities over which you have significant influence or joint control then applying equity accounting or including your share of assets and revenue would affect the thresholds.
• In determining the number of employees, the Act is clear that it is all full-time and part-time employees (on a pro-rata basis), however casual employees need to be considered. For example, are they genuinely casual with varying hours / shifts each week or are they in substance a permanent member of your team but just employed on a casual basis.
• The thresholds need to be met at the end of the financial year and therefore entities should track their performance during the year so they are aware if they will meet the definition of a large proprietary company at year end.