ASIC has released its areas of focus for 30 June 2017 reporting. While focus areas are consistent to prior reporting periods, all preparers (listed and unlisted) need to ensure all relevant aspects are addressed.
In its 6-monthly release of focus areas ASIC continues to urge preparers of financial reports to provide useful and meaningful information in their reports. Once again ASIC has confirmed the three broad areas of focus as:
Further details are outlined in our ASIC areas of focus: Guide for directors and preparers (PDF 167KB).
Asset values and related impairment testing is still high on ASIC’s matters for attention. ASIC continues to question entities on both the bases of impairment calculations and the disclosures relating to models, assumptions and inputs.
In recent surveillance, ASIC has also questioned a number of preparers on the approaches used for revenue recognition in their financial reports.
This reporting period ASIC has approached its call for useful and meaningful financial reports from the perspective of the directors’ role in the quality thereof. Directors are reminded that while the independent auditor has a role in providing assurance on the financial report, that directors themselves have the principal responsibility for the quality of the financial report. Directors need to hold management to account for preparing timely and supported financial information. Together, this promotes the finanical information available to the market being of a high quality.
This is the first financial year end of listed entities with 30 June reporting periods that enhanced audit reports will be effective. Areas identified by ASIC as being of focus, such as accounting estimates and significant accounting policy choices, as well as information included in the Operating Financial Review, could be included in enhanced audit reports as key audit matters. ASIC reminded entities that attention should be paid where particular disclosures or 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, subject to transition elections, 30 June 2017 is the beginning of the comparative period for the Financial Instruments and Revenue standards.
In mid-December 2016 ASIC issued a separate media release outlining its expectations with respect to implementation and disclosure of the possible impact of the standards. In particular, ASIC has highlighted that this may mean the disclosure of quantitative impacts needs to be included in financial 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 in cases where there will be no material impact may also be important information for the market.
“The nature and extent of possible impact disclosures will be dependent on how advanced management is with the implementation of its transition plan. However, the aim is for companies to progressively enhance the disclosures as new accounting policies are defined, estimation uncertainty reduces and the effective date of the new standards approaches. Quantitative information may well be given only in the form of an impact range or a number that is appropriately caveated. However, where quantitative information is not yet available, then qualitative information like for example, the types of transactions, asset and liability balances impacted, and the key implementation issues that the company is working through would be expected to be disclosed.”
“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.”