On 6 June 2023, the Australian Securities and Investments Commission (ASIC) announced its focus areas for 30 June 2023 reporting. Key take aways are summarised below.
23-149MR ASIC HIGHLIGHTS FOCUS AREAS FOR 30 JUNE 2023 REPORTING
In its latest media release, ASIC has urged directors, auditors and those that prepare financial reports to assess the impact of uncertain market and economic conditions on reporting for full and half-years ending 30 June 2023.
ASIC Commissioner Danielle Press said, ‘Directors should ensure that investors are properly informed on the impact of changing and uncertain economic and market conditions, ‘net zero’ targets and other developments on financial position and future performance. Impacts on asset values and provisions should be assessed, and uncertainties, key assumptions, business strategies and risks disclosed.’
ASIC has highlighted a number of areas for attention, in particular:
• asset values;
• provisions;
• solvency and going concern assessments;
• events occurring after year end and before completing the financial report;
• disclosures in the financial report and Operating and Financial Review (OFR); and
• the impact of a new accounting standard for insurers.
Noting that disclosures in financial reports about uncertainties, key assumptions and sensitivity analysis are important to investors, ASIC also specifically stated that directors and management should assess how the current and future performance of an entity, the value of its assets and provisions, and business strategies, may be affected by changing circumstances, uncertainties and risks such as (without limitation):
• the availability of skilled staff and expertise, which can impact on revenue and costs;
• the impact of rising interest rates on future cash flows and on discount rates used in valuing assets and liabilities;
• inflationary impacts that may differ between costs and income;
• increases in energy and oil prices;
• geopolitical risks, including the Ukraine/Russia conflict;
• impacts of climate change, climate related events and transitioning to ‘net zero’;
• technological changes and innovation;
• COVID-19 conditions and restrictions during the reporting period;
• changes in customer preferences and online purchasing trends;
• the discontinuation of financial and other support from governments, lenders and lessors;
• legislative and regulatory changes; and
• other economic and market developments.
Further pressing the importance of clarity and transparency in financial reports in a time of market uncertainty and providing greater insight into ASIC’s expectations in respect of such matters, Ms Press went on to note that ‘assumptions underlying estimates and assessments for financial reporting purposes should be both reasonable and supportable’.
ASIC full media release can be found via ASIC’s website.