ASIC has released its areas of focus for 31 December 2016 reporting. While focus areas are consistent to prior reporting periods, preparers need to ensure all relevant aspects are addressed.
ASIC has used its 6-monthly release of focus areas to remind preparers of financial reports to provide useful and meaningful information in their reports. To this point ASIC has again confirmed the three broad areas of focus as:
Further details are outlined in our guidance – ASIC areas of focus: Guide for directors and preparers (PDF 166KB).
The choice of accounting policy can affect reported results. ASIC advised that appropriate selection of accounting policies and disclosure of related assumptions and judgements continue to be areas of focus.
Asset values and related impairment testing is still high on ASIC’s focus list. Not only the disclosures relating to models, assumptions and inputs, but also the bases of these impairment calculations continues to be scrutinised by ASIC.
Enhanced audit reports for listed entities will be effective for the first time for financial years ending on or after 15 December 2016. Key audit matters included in these enhanced audit reports may relate to areas identified by ASIC as being of focus, such as accounting estimates and significant accounting policy choices. ASIC reminded entities that attention should be paid where these particular focus areas and key audit matters align.
The three new accounting standards to be implemented over the next two years; being AASB 9 Financial Instruments, AASB 15 Revenue from Contracts with Customers and AASB 16 Leases; are identified as potentially having the most significant impact on financial reporting since the adoption of International Financial Reporting Standards (IFRS) in 2005. Disclosures relating to their impact is of increasing interest to ASIC, particularly as the comparative periods for two of these standards (Financial Instruments and Revenue) commences on 1 January 2017.
ASIC issued a separate media release in mid-December 2016, outlining its expectations with respect to implementation and disclosure of the possible impact of the standards. In particular, ASIC has an expectation of disclosure of quantitative impacts in 31 December 2016 reports where this coincides with the start of the first comparative period that will be affected in a future financial report. ASIC noted that information that there will be no material impact may also be important information for the market.
"Whilst these new standards have a significant impact on the reporting of revenues, financial instrument values and lease arrangements, they can have broader business impacts, for example on systems and processes, and compliance with financial condition requirements. Therefore like ASIC, we urge companies to progress their implementation projects relating to the new standards as a priority.”
KPMG Australia’s Department of Professional Practice
As highlighted, there are no significant changes in ASIC’s focus areas for 31 December 2016 from those at 30 June 2016 and 31 December 2015.
The focuses are targeted at listed and other entities of public interest with many stakeholders. ASIC also reviews the financial reports of proprietary companies and unlisted public companies on a reactive basis from complaints and other intelligence. As such, the focus areas should be considered by all entities.