ASIC has released its key focus areas for the December 2022 reporting season.

THE REPORTING PROCESS

ASIC has set out some matters in the reporting process that need to be kept in mind;

• Appropriate experience and expertise should be applied in the reporting and audit processes, particularly in more difficult and complex areas, such as asset values, estimates and forward-looking information. The basis for those judgements should be properly documented.

• Directors and auditors should be given sufficient time to consider reporting issues and to challenge assumptions, estimates and assessments.

• Directors should make appropriate enquiries of management to ensure that key processes and internal controls have operated effectively during periods of remote work.

LNP Comment

Preparers need to start thinking about the reporting process for December now. Make sure that you have all supporting workpapers available and have a discussion with your auditors early about the reporting process.

FOCUS AREAS

In highlighting these focus areas ASIC is urging directors, preparers of annual and half-year reports and auditors to assess whether companies’ financial reports provide useful and meaningful information for investors and other users.

 ASIC has highlighted a number of areas for attention, in particular:

 1.      Assets Values

ASIC notes that a number of uncertainties and risk may affect asset values. Directors, preparers and auditors should give close attention to asset values in the current environment including:

LNP Comment

Impairment of non-financial assets will be a focus for ASIC this December. You need to make sure that impairment calculations are fully supported reasonable assumptions and full documentation.

 2.   Provisions

Consideration should be given to the need for and adequacy of provisions for matters such as onerous contracts, leased property make good, mine site restoration, financial guarantees given and restructuring.

 3   Solvency and Going Concern Assessments

Companies will be affected differently by changing and uncertain economic and market conditions depending on their industry, where they operate, how their suppliers and customers are affected, and a range of other factors.

Directors and management should assess how the current and future performance of a company, its on-going solvency and business strategies, may be affected by changing circumstances, uncertainties and risks.

LNP Comment

ASIC are emphasising that solvency and going concern considerations need to take into account the current economic environment. Going concern assessments need to be supported by robust assumptions that are realistic in considering the risks that your business may face over the next 12 months.

 4   Subsequent Events

Events occurring after year-end and before completing the financial report should be reviewed as to whether they affect assets, liabilities, income or expenses at year-end or relate to new conditions requiring disclosure.

 5   Disclosures

ASIC have highlighted a number of areas in relation to disclosures in financial statements. In particular the following matters were highlighted.

• The financial report should disclose uncertainties, changing key assumptions and sensitivities.

• The appropriate classification of assets and liabilities between current and noncurrent categories on the statement of financial position should be considered.

• The Operational and Financial Review (OFR) should complement the financial report and tell the story of how the entity’s businesses, results and prospects are impacted by economic and market conditions, the COVID-19 pandemic and changing circumstances.

• Half-year reports should disclose information on significant developments and changes in circumstances since 30 June 2022

LNP Comment

ASIC expects that preparers should draft disclosures in the financial report and OFR from the viewpoint of investors – “to put themselves in the shoes of investors”. Disclosures need to provide information that investors need.

DISCONTINUATION OF EXTENSIONS OF TIME

Finally ASIC have announced that they will not be giving a general extension of unlisted entity’s December 2022 reporting deadlines.

LNP Comment

There will be no further extensions of time this reporting season. Keep this in mind when planning your financial report schedule.

The full ASIC media release can be found here.

If you need any assistance with any of these matters we can help.

Our senior team has a comprehensive understanding of the issues and ASIC’s expectations for the December reporting season. Contact one of our Directors or email us at info@lnpaudit.com