In announcing its focus areas for 30 June 2017 financial reports of listed entities and other entities of public interest with many stakeholders, ASIC has continued to call on companies to focus on giving information for users of financial reports that is useful and meaningful.
Key issues highlighted by ASIC include:
- values of assets and accounting policy choices – ASIC has noted that it continues to see companies use unrealistic assumptions in testing the value of assets or apply inappropriate approaches in areas such as revenue recognition;
- the role of directors and management – companies should have appropriate processes and records to support financial information (rather than relying on the auditor) and should apply appropriate experience and expertise particularly in more complex areas such as accounting estimates, accounting policies and recognition. While directors are not expected to be accounting experts, they should seek explanation and advice and, where appropriate, challenge accounting estimates and treatments, particularly where the treatment does not reflect their understanding of an arrangement;
- the need to plan for new accounting standards;
- the outlining of key audit matters in enhanced audit reports - auditors should describe key audit matters and their work in those areas in a clear and understandable manner and directors and report preparers should be mindful that these matters may relate to accounting estimates and significant accounting policy choices that also require specific disclosures in financial reports;
- continued ASIC focus on material disclosures of information useful to investors and other users of financial reports (ASIC will not pursue immaterial disclosures that may add unnecessary clutter to financial reports);
- the holding of client monies by Australian financial services licensees in separate designated accounts and the application of such monies in accordance with client instructions and the requirements of the Corporations Act 2001 (Cth); and
- continued disclosure in operating and financial reviews of information on matters that may have a material impact on the future financial position of the company eg climate change or cyber-security.
ASIC has also indicated that it will continue to review the financial reports of proprietary companies and unlisted public companies, based on complaints and other intelligence.
For further details of ASIC focus areas, see ASIC media release dated 31 May 2017.