ASIC's big five areas of focus

By Hayley Keagan
Technical Director
5 August 2022

ASIC operates a financial reporting surveillance program, whereby they review a selection of financial reports of listed and other significant companies. As part of the surveillance program, ASIC announces the areas of financial reporting that they intend to focus on for the next round of reviews. ASIC’s top 5 areas of focus for 30 June 2022 financial reports are summarised below, for your easy reference:

Area The focus What you can do
Asset values

ASIC will look to ensure assets are not inflated with a particular focus on those that require estimates.

This serves as a good reminder that estimates present themselves in many assets, including impairment, fair values,
ECLs provisions, inventory NRV.

  • Perform impairment testing where necessary
  • Check that estimates are supportable by observable data
  • Update estimates for economic issues.
Provisions ASIC is interested to see if all provisions are considered in a financial report and that amounts provided for are sufficient.
  • Review all contracts for potential provisions or contingencies (ie warranties, make-good requirements, onerous conditions)
  • Ensure that estimated provisions take into consideration all likely outflows
  • Update estimates from prior periods for current conditions.
Solvency and going concern With inflation and interest rates on the rise, it is a good time for ASIC to be focusing on solvency and going concern
assessments.
  • Prepare a going concern assessment that considers the impact of both internal and external factors
  • Perform solvency checks prior to signing the director’s declaration
  • Reach out for help if you need it.
Subsequent events ASIC will be checking whether events that have occurred subsequent are adjusting or disclosing events.
  • Subsequent events ASIC will be checking whether events that have occurred subsequent are
  • adjusting or disclosing events.
  • Firstly, ensure you identify all subsequent events which may have an impact on the financial situation of the business
  • Refer to AASB 110 for guidance on what is adjustable and what is disclosing.
Disclosures in the director's report ASIC has commented in several publications about the need for directors to sharpen their pencils when preparing their operating and financial review (OFR) commentary for the director’s report. This is no doubt an area that will be highly scrutinised by ASIC for 30 June 2022.
  • Refer to RG 247 which provides guidance on preparing an OFR
  • Review other publicly available information to ensure it is consistent with the message in your OFR
  • Ensure the OFR covers off on material business risks.

 

This is just our top 5 areas of focus on ASIC’s radar. You can view all areas of focus here, and the results of ASIC’s most recent review of financial reports here. You will see that the areas of focus align heavily with the areas of concern from ASIC’s last review.


If you would like any assistance with aligning your financial reporting with ASIC’s areas of focus, please reach out to your local PKF Audit representative.

To read more articles in the Winter 2022 edition of Clarity, click here