Reporting Update 24RU-01

ASIC has released its areas of focus for 31 December 2023 reporting. The areas are largely consistent with those communicated for 30 June 2023 and identified in ASIC’s integrated financial reporting and audit surveillance report released in October 2023. All preparers (listed and unlisted) should ensure all relevant aspects are addressed.

Uncertainties and changing market conditions

Geopolitical events, natural disasters, climate effects and inflationary pressures continue to drive uncertainty across the globe.  Such uncertainty brings numerous issues and risks for companies, including shifts in consumer demand, disrupted supply chains, staff shortages and increased market volatility.

In ASIC’s media release of December 2023, ASIC highlighted Directors’ responsibilities and the need for documentation to support judgements.  Kate O’Rourke, ASIC Commissioner, noted: “Directors should ensure that company financial reports provide investors with useful and meaningful information on the impact of changing and uncertain economic and market conditions and other developments on their company’s financial position and future performance.”

Directors have the responsibility of applying sufficient resources, skills, and expertise to enhance the quality of the reporting process, ensuring all assumptions for financial reporting are reasonable and supportable.

Uncertainties, key assumptions, and sensitivity analysis in a financial report are significant to investors. Directors and management should assess and document 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.

In the present climate, entities continue to face uncertainties about future economic and market conditions and the impact on their businesses. These uncertainties amplify pressure on various financial reporting aspects particularly judgements, estimates and assessments.

Useful and meaningful disclosures in the financial report about uncertainties, key assumptions and sensitivity analysis therefore continue to be important to investors.

Documenting the basis for judgements is a critical part of the governance process. We encourage directors to take the time to consider the uncertainties and how these should be reflected in the financial report.

Julie Locke

Financial reports and audit surveillance program results

The future focus areas are identified from the results of ASIC's surveillance programs. ASIC has integrated its financial reporting and audit surveillance programs. The new surveillance program continues to adopt a risk-based approach in selecting ASX-listed and large unlisted entities for review.

In its October 2023 surveillance report, of the 180 financial reports reviewed for years ended 31 March 2022 to 28 February 2023, ASIC commenced 55 surveillances covering 93 issues. 25 entities made adjustments to previously released financial information as a result of concerns raised by ASIC.

The following areas continued to be areas where most queries were raised:

  • Disclosure of material business risks in the Operating and Financial Review (OFR)
  • Impairment of assets
  • Revenue recognition

Focus areas for 31 December 2023

The areas of focus identified by ASIC are broad, with the four major themes being:

  • Asset values
  • Provisions
  • Subsequent events
  • Disclosures – Financial report, OFR, non-IFRS financial information and half-year

Read further discussion on each of these areas, including guidance for preparers to consider in addressing the focus areas, in our Reporting Update.

ASIC ongoing monitoring programs

Climate change risk continues to be a topic of ongoing focus for ASIC.  Climate-related risks could have a material impact on the future prospects of entities.  ASIC continues to encourage listed Australian entities to use the recommendations of the Taskforce for Climate-related Financial Disclosures (TCFD) as the primary framework for voluntary climate change-related disclosures until such time as mandatory Australian Sustainability Reporting Standards are developed.    

During the current financial year ASIC has taken a number of greenwashing actions resulting from its greenwashing surveillance activities.  This program examines representations on environmental, social and governance credentials by listed companies, managed funds and superannuation funds.  It extends to any statements included in the OFR or other parts of the annual report.  

Cyber security risks could have a material impact for particular entities and, where relevant, are required to be disclosed.  Considerations include the impacts of a loss of personal data or a denial of service attack, such as the extent and nature of personal data held and possible impacts on revenue.