Klarna’s struggling local arm has taken steps to end having to prepare and lodge audited financial accounts in Australia, after the disclosure of recent operating losses highlighted weaknesses in the company’s business model. Klarna Australia Pty Ltd recently reported details on its financial performance for the 12 months to the end December 2021, which included a disclosure that the company had a net asset deficiency of more than A$70 million. Disclosures in the 2021 accounts showed that the local subsidiary was continuing to trade only with explicit financial support from its Swedish based parent, Klarna Bank AB. Klarna’s Australian business has been losing money since it launched its buy now pay later programs with the backing of Commonwealth Bank in 2020. While the company posted a net loss of $14 million in 2020, the negative bottom line deteriorated to $56 million in 2021. However, the local company is hoping that the sharp fall in the market value of Klarna global business means that it will no longer be required to lodge accounts with the Australian Securities and Investments Commission. The value of Klarna’s global operations plunged 85 per cent to around US$7 billion following a heavily discounted capital raising last July. Klarna’s Australian board notified ASIC last month that it would not be lodging financial accounts for the 12 months to the end of December 2022 on the grounds that the local subsidiary was a “small proprietary company controlled by a foreign company which is not part of a ‘large group’”. In a filing to ASIC on 7 March, the directors of Klarna Australia Pty Ltd said they had resolved not to prepare a financial report for 2022 under special relief provisions that the regulator declared by instrument in 2017. The instrument grants relief from foreign-owned companies having to lodge audited accounts with ASIC if the parent company is judged not to be a “large group” during the financial year in which the relief is being sought for. According to the ASIC instrument, a large group of companies is defined as a group which employs 50 or more people, generates combined revenue of A$25 million and holds gross assets of A$12.5 million. Apart from the large deficiency in net assets at the end of 2021, the gravity of Klarna’s Australian business performance in that year was also underlined by the disclosure that credit loss charges had blown out to $8.5 million. The credit loss expenses equated to about 56 per cent of the local receivables base ($15.1 million) reported by the company on 31 December 2021.