Don't Get Caught Off Guard: ASIC's Latest Focus Areas For Financial Reporting

The Australian Securities & Investments Commission (ASIC) has released its key focus areas for the 31 December 2024 reporting period, highlighting the areas they will be scrutinising most closely. While there are no major surprises, ASIC is doubling down on ensuring companies are not cutting corners. Think of it as their “greatest hits” of financial reporting pitfalls – areas where companies have tripped up in the past and continue to do so.

1. Asset values

ASIC will be paying close attention to the valuation of assets susceptible to impairment. This includes scrutiny of expected credit losses, financial assets, the realisability of inventory values, and the recoverability of deferred tax assets.

2. Provisions

Adequate provisioning remains a key focus. ASIC will be reviewing provisions for onerous contracts, financial guarantees, restructuring costs, lease make-good expenses, and mine site restoration obligations.

3. Subsequent Events

Preparers are reminded of their obligation to carefully consider and disclose any subsequent events that materially impact the reported financial position or performance. This includes events occurring between the reporting date and the date the financial report is authorised for issue.

4. Disclosures

Clear and comprehensive disclosures are crucial. ASIC expects robust disclosures around key assumptions and the risks associated with significant transactions and balances. The Operating and Financial Review (OFR) should provide a balanced view of the entity’s performance and prospects, including a discussion of relevant business risks. This extends to emerging risks related to environmental, social, and governance (ESG) factors, including cybersecurity.

Robust financial reporting is not just about ticking boxes; it is about building trust. Companies that proactively address these focus areas will not only stay on ASIC’s good side but also build confidence with investors and stakeholders.