ASIC has identified a wide range of focus areas for 31 December 2014 financial reports of listed entities and other entities of public interest with a wide range of stakeholders. Directors, auditors and preparers of financial reports need to take particular care on these issues and consider whether any changes to their reporting and accounting policies and practices are necessary. Directors should also, where appropriate, challenge and seek professional accounting advice about accounting treatments chosen, particularly where an accounting treatment does not reflect their understanding of the substance of an arrangement.
ASIC has announced its findings from 30 June 2014 financial reports of 300 listed and other public interest entities. As part of its review, ASIC contacted 55 entities seeking explanation in relation to 73 matters, the majority of which related to inadequate asset impairment and inappropriate accounting treatments.
ASIC has also announced its areas of focus for 31 December 2014 financial reports of listed entities and other entities of public interest with a large number and wide range of stakeholders. The 8 key areas of focus are:
- impairment testing and asset values, with a focus on the recoverability of the carrying amounts of assets, including goodwill, other intangibles and property, plant and equipment, and the reasonableness of cash flows and assumptions;
- amortisation of intangible assets including amortisation periods and methods applied for intangible assets;
- off-balance sheet arrangement, the accounting for joint arrangements and disclosures relating to structured entities;
- revenue recognition, including ensuring recognition in accordance with the substance of the underlying transactions;
- expense deferral including ensuring expenses are only deferred where there is an asset as defined in the accounting standards, it is probable that the future economic benefits will arise, and the requirements of the intangibles accounting standards are met;
- tax accounting and ensuring that there is a proper understanding of both the tax and accounting treatments, the impact of any recent legislative changes are considered and the recoverability of any tax asset is appropriately reviewed;
- disclosures regarding sources of estimation uncertainty and significant judgments which should be specific to the assets, liabilities, income and expenses of the entity and including disclosures of key assumptions and a sensitivity analysis; and
- the impact of new In International Financial Reporting Standard IFRS 15 Revenue from Contracts with Customers which is reflected in the new AASB 15 Revenue from Contracts with Customers (approved by the Australian Accounting Standards Board on 23 December 2014), both of which will be mandatory for reporting periods commencing on or after 1 January 2017).