Clarity in corporate reporting – May 2025 monthly newsletter

Understand the regulator’s perspectives on upcoming reporting

On 19 May 2025, ASIC has released its focus areas for the 2025-26 financial year. The overall focus for the current period is largely consistent with previous reporting periods whilst responding to recent surveillance findings. These focus areas are the first to be issued on an annual basis and cover both the June 2025 and December 2025 reporting periods.

In relation to financial reporting, ASIC’s enduring focus areas remain in place with an emphasis on areas where significant judgement from preparers is required. In its media release, ASIC specifically highlights:

• Revenue recognition – although not specifically mentioned on the enduring focus areas page, a focus on this area is consistent with ASIC’s observations in Report REP 799 ASIC’s oversight of financial reporting and audit 2023-24 (REP 799). In that report, ASIC noted four matters were raised through financial reporting surveillance and 10 matters raised through audit surveillance (the area with the largest number of matters raised)
• Asset valuation – this includes impairment of non-financial assets, the values of property assets, expected credit losses and financial asset classification
• Estimate of provisions – the need for and adequacy of provisions in areas such as onerous contracts, make good provisions, mine site restoration, financial guarantees and restructurings.

ASIC links its focus on these topics to the need for judgements “especially considering recent capital market volatility”. The enduring focus areas also include subsequent events and disclosures (including in the operating and financial review). The need for judgement and disclosure is a central theme in ASIC’s enduring focus areas and surveillance.

ASIC has also confirmed an expansion in the number of audit files that will be reviewed as part of its audit surveillance activities, which will include a random selection of audit files in the current period (responding to recommendations in a Parliamentary report issued in November 2024). In REP 799, ASIC notes a direct relationship between shortcomings in a financial report and the quality of audit work undertaken on the financial report. The move to a random sample of audit files in addition to targeting audit files where matters have been raised from financial reporting surveillance suggests a ‘two-way’ approach going forwards.

In addition to the enduring focus areas, ASIC calls out the following:

• Registrable superannuation entities – ASIC notes two areas arising from its surveillance activities on registrable superannuation entities (RSEs) for June 2024: (1) measurement and disclosure of investment portfolios and (2) disclosure of marketing and advertising expenses. RSEs and their auditors should respond to these areas in the current reporting period. ASIC also noted it has reviewed approximately half of all lodged RSE financial reports in the first year of reporting under the Corporations Act 2001 and expects to review the other half as part of its 2025-26 surveillance program
• Previously grandfathered entities – ASIC will continue to work with these entities to ensure financial reports are lodged, and notes auditors should inform ASIC where they are aware of non-compliance with lodgement of financial reports
• Sustainability reporting – ASIC confirms that it will review December 2025 sustainability reports as part of its 2025-26 program within its “proportionate and pragmatic approach” to supervision and enforcement. In REP 799, ASIC noted it had reviewed voluntary sustainability and climate change reporting of listed companies and that the findings from that review would inform its ongoing work on mandatory sustainability reporting in Australia
• Auditor conflicts of interest surveillance – ASIC is targeting auditor compliance with independence and conflicts of interest obligations under the Corporations Act 2001. ASIC announced its data model resulted in the consideration of over 100 audit engagements with potential independence issues
• Consolidated entity disclosure statement - ASIC has updated its information sheet on the consolidated entity disclosure statement to consider recent legislative changes and reminds public companies the changes are relevant for financial years commencing on or after 1 July 2024 (i.e. first applying at 30 June 2025).

More information:

• ASIC media release 25-079MR ASIC announces financial reporting and audit focus areas for FY 2025-26
• ASIC’s enduring financial reporting focus areas
• ASIC REP 799 ASIC’s oversight of financial reporting and audit 2023-24
• June 2025 Tier 1 models and reporting considerations publication
• Clarity publication New consolidated entity disclosure statement
• Parliamentary Joint Committee on Corporations and Financial Services Report Ethics and Professional Accountability: Structural Challenges in the Audit, Assurance and Consultancy Industry.

What do Australian entities need to know as they implement mandatory sustainability reporting?

On 28 April 2025, the International Sustainability Standards Board (ISSB) released an exposure draft which proposes several amendments to the disclosure requirements for greenhouse gas emissions arising under IFRS S2 Climate-related Disclosures. 

In summary:

• The proposed fast-track amendments would respond to application issues identified with IFRS S2
• The amendments are intended to be finalised by the end of 2025 to be available for early adoption for first-time application of mandatory sustainability reporting in Australia (subject to the feedback and redeliberation)
• Clarifications would explain that alternatives to the GHG Protocol and Intergovernmental Panel on Climate Change (IPCC) global warming potential (GWP) values could be used for part of an entity in some circumstances
• Mandatory disclosure of Scope 3 greenhouse gas emissions associated with investments (Category 15) would be limited to loans and investments, expressly excluding emissions associated with derivatives, facilitated emissions and insurance-associated emissions (with additional disclosure)
• Industry classification requirements when disaggregating financed emissions information for commercial banking and insurance activities would be more flexible.

The detail:

The proposed amendments resulted from application issues originally considered by the Transition Implementation Group on IFRS S1 and IFRS S2 (TIG) and were agreed by the ISSB at its January 2025 meeting.

The proposed amendments are as follows:

• Departures from using the GHG Protocol to measure emissions. The existing reference to using an alternative to the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004) (GHG Protocol) when measuring greenhouse gas emissions would be clarified to explain an alternative measure could be used for part of an entity when a jurisdictional or exchange requirement applies to that part of an entity. For instance, where the National Greenhouse and Energy Reporting Scheme (NGER) applied to part of the entity, greenhouse gas emissions could be measured using NGER for that part of the entity and the GHG Protocol for the remainder
• Global warming potential values. Similar to the GHG Protocol proposals, an entity required by a jurisdictional authority or exchange to use global warming potential values other than those from the latest IPCC assessment available at the reporting date, can use those alternative GWP values when measuring emissions for part of an entity
• Disclosure of Scope 3 Category 15 greenhouse gas emissions:

- Limitation of disclosures. Entities would be permitted to limit disclosure of Scope 3 Category 15 (investments) greenhouse gas emissions to financed emissions attributed to loans and investments (including loans, project finance, bonds, equity investments and undrawn loan commitments). For these purposes, the proposals expressly exclude greenhouse gas emissions from derivatives (without providing a definition of a “derivative” due to potential GAAP and framework differences), facilitated emissions and insurance-associated emissions. However, entities could choose to disclose these emissions if they wish

- Transparency of exclusions. Entities would be required to provide information about excluded derivative and other financial activity emissions 

• Industry classifications. The proposals would permit an entity with commercial banking or insurance activities to adopt an industry classification other than the Global Industry Classification Standard (GICS) for classifying counterparties when disaggregating financed emissions where required by a jurisdictional authority or exchange (which may include prudential reporting). Where more than one such requirement exists, the entity would be required to select one classification system. However, if the entity uses GICS in any part of the entity, it would be required to use GICS when disaggregating all financed emissions. Where the entity does not use GICS and is not subject to jurisdictional or exchange requirements, the entity could use an industry classification system of its choice. Entities would be required to disclose information about any alternative classification system used.

The ISSB intends to fast-track the amendments, expecting redeliberation to be completed in the second half of 2025. The exposure draft is open for a 60 day comment period until 27 June 2025.

On 29 April 2025, the AASB has issued an equivalent exposure draft, AASB ED SR2 Amendments to Greenhouse Gas Emissions Disclosures. The comment period ends on 2 June 2025. 

More information:

• ISSB/ED/2025/1 Amendments to Greenhouse Gas Emissions Disclosures
• Basis for Conclusions on Exposure Draft Amendments to Greenhouse Gas Emissions Disclosures
• AASB ED SR2 Amendments to Greenhouse Gas Emissions Disclosures
• iGAAP in Focus ISSB proposed amendments to IFRS S2 regarding specific gas emissions disclosure requirements

Use our models to enhance your corporate reporting for the June 2025 reporting season

The following June 2025 editions of the models are available on our model financial statements page:

• Tier 1 model financial report – this model financial report can be used as a guide in achieving best practice outcomes in annual reports of ‘Tier 1’ entities. This document also outlines key developments and requirements for mandatory climate related reporting starting from January 2025
• Tier 2 model financial report – this guide has been updated for newly effective requirements, which fortunately are limited. Changes have been highlighted throughout the document.

In addition, we have our Australian financial reporting guide and other editions of model financial reports, available on our model financial statements page.

In-person or online options still available 

We’re now at the half-way point of our Corporate Reporting Update events. With reporting season just around the corner, the Corporate Reporting Update guides you through the key focus areas to navigate reporting season with confidence. 

We welcome you to sign-up and join us at one of our remaining sessions below:

• Perth, Thursday 29 May
• Melbourne, Wednesday 4 June
• Sydney, Thursday 5 June
• Hobart, Wednesday 11 June.

If your city’s update has already passed, a virtual live stream will also be held on Wednesday 4 June.

Updated Clarity publications on CEDS and Pillar Two

We have issued an updated New consolidated entity disclosure statement Clarity publication to outline the amendments that apply in the second year of preparing the consolidated entity disclosure statement.

An updated Clarity publication, Responding to Pillar Two is also available, addressing frequently asked questions arising in the initial periods where Pillar Two is effective.