ASIC Releases guidance on focus areas for financial reporting FYE 2022

By Luba Poukchanski - Practical Guidance Legal Writer - Consumer, Corporations

On 6 June 2022 the Australian Securities and Investments Commission announced new guidance on focus areas for financial reporting for FYE 2022.

As in previous years, ASIC reminds directors, auditors and preparers of financial reports for entities to focus on reporting of:

• factors affecting asset values — including impairment of non-financial assets, the value of property assets, expected credit losses on loans and receivables, and value of other assets;
• provisions for matters such as onerous contracts, financial guarantees given and restructuring;
• events that occur after year end but prior to completion of financial reports; and
• disclosures in the financial report and the Operating and Financial Review (OFR).

ASIC has also reminded entities to assess changing circumstances, uncertainties and risks relating to future economic and market conditions.

Such assessments are to ensure that assumptions underlying estimates of asset values and liabilities, and assessments of solvency and going concern used in financial reporting, are reasonable supportable, and that appropriate disclosures are made in reports. These factors will differ depending on the entity, the industry it operates in and other relevant circumstances.

ASIC has provided the following broad, yet non-exhaustive list:

• COVID-19 conditions and restrictions during the reporting period, including ongoing COVID-19 restrictions in different jurisdictions;
• changes in customer preferences and online purchasing trends;
• use of virtual meetings and flexible working arrangements;
• discontinuation of temporary financial and other support measures from governments, lenders and lessors;
• the availability of skilled staff and expertise;
• the impact of rising interest rates on future cash flows and on discount rates used in valuing assets and liabilities;
• increases in oil prices;
• geopolitical risks, including the Ukraine/Russia conflict;
• commitments and policies on climate and carbon emissions by governments;
• technological changes and innovation;
• legislative and regulatory changes; and
• other economic and market developments.

Finally, ASIC has reminded reporting entities that judgments upon which accounting estimates and forward-looking information is provided and the basis for those judgements, should be properly documented and disclosed.

Any assumptions, estimates, assessments and forward-looking information should have a reasonable basis, and continuous disclosure obligations to report to the market if these changes must be complied with.

ASIC will review the full-year financial reports of selected larger listed entities and other public interest entities for FY 2022.

ASIC’s media release and the accompanying guidance are available here.

For more detailed information on company reporting requirements, check out Practical Guidance Corporations.

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