Clarity in corporate reporting - May 2026 monthly newsletter

Consider ASIC’s key focus areas in upcoming reports

ASIC has announced its key focus areas for financial reporting, audit and sustainability reporting activities in the 2026-2027 financial year.

Summary

• ASIC’s “enduring” financial reporting focus areas largely remain unchanged, with the most significant change being compliance with new AASB guidance on the impacts of uncertainties on provisions
• Continued surveillance and focus on non-lodgement of financial reports, reporting by registrable superannuation entities as well as various audit-related matters (including expanding the number of audit files reviewed)
• Preliminary findings from ASIC’s review of sustainability reports provides insights for June 2026 reporting. Entities preparing sustainability reports for June 2026 and later periods should consider these findings in preparing their reports
• An amended Corporations Instrument allows a registered scheme to include, in its sustainability report for a financial year, the sustainability reports of its related schemes for the financial year.

Details

Financial reporting

Consistent with its enduring financial reporting focus areas, ASIC intends to monitor financial reporting areas where significant judgement is required, including revenue recognition, assessment of asset impairment and the recognition and measurement of financial instruments. 

As part of its focus on provisions, ASIC will review disclosures of entities with decommissioning and site-restoration costs in light of the illustrative examples recently introduced in AASB 137 Provisions, Contingent Liabilities and Contingent Assets by AASB 2026-1 Amendments to Australian Accounting Standards – Disclosure of Uncertainties in the Financial Statements. The illustrative example illustrates how an entity might disclose information about plant decommissioning and site-restoration obligations even if their effect on the carrying amount of the entity’s plant decommissioning and site-restoration provision is immaterial. The example discusses disclosures appropriate where efforts to transition to a lower-carbon economy represent an increasing risk that facilities will be closed earlier than expected. 

In addition, the enduring focus areas include subsequent events and presentation and disclosure with no changes from previous periods.

The only additional specific financial reporting focus areas for 2026-2027 include financial reporting by registrable superannuation entities.

In the accompanying press release, ASIC announced it will also continue to focus on the non-lodgement of financial reports.

Sustainability reporting and assurance

ASIC has separately released preliminary observations from its surveillance of lodged sustainability reports for December 2025.

ASIC notes an increase in the quality and quantity of climate-related financial information when compared to voluntary disclosures.

ASIC further notes opportunities to strengthen the quality of reporting, including:

• Avoiding disclaimers that conflict with the statutory framework and objectives of mandatory sustainability reporting as these are not permitted to be used (including indications that users should not rely on the information contained in the sustainability report to make investment decisions, or that the entity took no responsibility for the accuracy or completeness of certain information)
• Considering the ‘reasonable and supportable’ information available to entities to identify climate-related risks includes information about ‘past events, current conditions and forecast future conditions’ – particularly where entities have been financially impacted by extreme weather events in prior financial years but do not disclose similar risks impacting prospects over the short, medium or long term (or any related mitigation activities)
• Ensuring reports provide clear, effective and proximate disclosure of relevant judgements, assumptions and areas of measurement uncertainty – including how the entity had applied the proportionality mechanisms in AASB S2
• Not obscuring material climate-related information with voluntary additional information. ASIC suggests index tables can be useful for setting out the location of information within the sustainability report
• Meeting disclosure requirements when cross-referencing information outside the sustainability report, including precisely specifying the part of the other report to be incorporated. Cross-referenced information must be published on the same terms and at the same time as the sustainability report and ASIC strongly encourages entities to lodge cross-referenced information with its sustainability report. Cross-referencing to information on websites or in reports not published by the entity is not permitted
• Reminding entities that the definition of 'climate-related targets’ in AASB S2 Climate-related Disclosures extends to targets the entity is required to meet by law or regulation, including greenhouse gas emissions targets such as the Safeguard Mechanism.

ASIC has updated many of its sustainability reporting resources on its website and is also participating in the Federal Government’s consultation on reforms to reduce burden while maintaining core sustainability reporting requirements as announced in the 2026-2027 Federal Budget (see below).

In addition, ASIC has amended ASIC Corporations (Related Scheme Reports) Instrument 2025/438 to enable a registered scheme to include, in its sustainability report for a financial year, the sustainability reports of its related schemes for the financial year, provided certain requirements are met.

Action points

• Ensure ASIC focus areas are considered early in the financial reporting and sustainability reporting process
• Entities with decommissioning and site-restoration obligations should carefully consider the additional AASB guidance when framing their June 2026 disclosures
• Entities preparing sustainability reports at June 2026 should respond to ASIC’s preliminary surveillance findings and other ASIC guidance available
• Registered schemes should consider the impacts of the amended Corporations Instrument and how this impacts the preparation of sustainability reports.

More information

• ASIC media release 26-098MR ASIC sets financial reporting, audit and sustainability focus areas for FY 2026-27
• ASIC news release ASIC issues early observations on sustainability reporting ahead of 30 June 2026
• ASIC FAQs: Review or audit of sustainability reports
• ASIC Corporations (Amendment) Instrument 2026/313
• ASIC Sustainability reporting and audit relief decisions register.

Key corporate reporting considerations

The 2026-2027 Federal Budget, delivered on 12 May 2026, announced several significant developments affecting corporate reporting. Many entities will benefit from reduced or simplified reporting requirements if these measures are implemented.

Summary

• Doubling reporting thresholds. The consolidated revenue and asset thresholds used to determine proprietary company financial reporting and ‘Group 3’ sustainability reporting obligations are proposed to double, reducing the number of entities within scope
• Sustainability reporting efficiencies. The Federal Government intends to consult on changes such as improving consistency in the application of reporting requirements, adjusting assurance settings and setting clearer  boundaries on supplier information requests
• Legislating group reporting relief.  Financial reporting relief for wholly-owned entities in corporate groups would be legislated and implemented through a simpler process than under the existing ASIC Corporations Instrument
• Funding External Reporting Australia. The budget provides funding to merge the Australian Accounting Standards Board (AASB), Auditing and Assurance Standards Board (AUASB) and Financial Reporting Council (FRC), including additional resourcing to support sustainability reporting.

No commencement date has been announced for these measures, and implementation will depend on consultation and the legislative process.

In addition, other announced measures may have financial reporting implications in areas such as impairment, deferred taxes and other models used for financial reporting.

Details

Doubling reporting thresholds

The thresholds for determining financial reporting obligations for proprietary companies and for Group 3 sustainability reporting will be doubled, for consolidated revenue from $50 million to $100 million and for consolidated assets from $25 million to $50 million.  The employee threshold will remain at 100 employees.  Relevant entities exceeding two or more of these thresholds will be required to report.

These changes would reduce the number of entities required to prepare financial and sustainability reports. Although the changes can be implemented through a legislative instrument, no effective date has yet been announced.

Sustainability reporting efficiencies

The Federal Government announced that it will consult on reforms aimed at reducing the burden of climate-related financial disclosures.  This will include:

• Improving consistency in the application of reporting requirements by clarifying how key concepts, including ‘undue cost or effort’, apply in practice
• Adjusting assurance settings to ensure they are proportional and practical
• Setting clearer boundaries on supplier information requests, to reduce costs and complexity, particularly for small businesses.

Further information on the proposals and how they are to be implemented is contingent on the release of consultation documents and the subsequent legislative processes.

Legislating group reporting relief

The budget documents announce that group financial reporting relief will be simplified by “replacing the need for deeds of cross guarantee with a simplified statutory process”.

Currently, wholly-owned group entities are required to comply with the complex requirements of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 in order to obtain relief. This proposal would legislate similar, but simplified, requirements in the Corporations Act 2001.

The process to make these legislative changes may take some time. In the meantime, ASIC is expected to consult shortly on a replacement Corporations Instrument, as the existing instrument sunsets on 1 October 2026.

Funding External Reporting Australia

The budget papers provide $4.8 million in funding over four years from 2026-2027 to finalise funding arrangements for External Reporting Australia (ERA). ERA will replace the AASB, AUASB and FRC, including additional resourcing to support sustainability reporting.

The legislation to give effect to the creation of External Reporting Australia is currently before the Senate after being passed by the House of Representatives in March 2026.  There will be no immediate corporate reporting impact when External Reporting Australia is created. However, there may be indirect impacts over time. For example, the creation of a separate sub-board for sustainability reporting may affect agenda setting and the pace and priorities of standard setting.

Financial reporting implications of other announced measures

In addition to the direct corporate reporting measures, entities will also need to consider the financial reporting implications of other tax and policy measures announced in the Budget.

For example:

• Announced measures may impact expected cash flows and other assumptions in impairment and other models, e.g. the changes to the research and development tax incentives may impact expected cash flows
• Changes to tax legislation may impact recoverability of deferred tax assets or introduce other considerations, e.g. the proposed carry back of tax losses may impact recognition of current tax assets, and the negative gearing changes (that also apply to companies and most trusts) may impact future taxable income forecasts or impact tax planning opportunities
• The announced intention to implement the "side-by-side" package in Australia's Pillar Two rules will only be recognised for financial reporting purposes when substantively enacted.

More details of the tax changes and broader economic themes arising from the budget can be found in our dedicated Australian Federal Budget 2026-2027 coverage.

Action points

• Reassess your future financial reporting and sustainability reporting obligations under the proposed thresholds
• Monitor consultations on sustainability disclosure burden-reduction measures
• Track developments on wholly-owned company relief, including a possible short-term replacement instrument
• Reassess impairment, deferred tax and other financial reporting  implications of announced measures.
  

New IFRIC agenda decisions released

At its April 2026 meeting, the IASB approved six new IFRIC agenda decisions.

The decision with the most immediate impact is the decision on the economic benefits arising from the use of a battery under an offtake arrangement under IFRS 16 Leases.  The decision considers how an entity determines whether a customer has the right to obtain substantially all of the economic benefits of an identified asset. 

In the fact pattern, the battery owner retains custody of the battery but is contractually required to operate a non-substitutable battery covering 100% of its capacity in accordance with the electricity retailer’s instructions.

The Committee observed that, in this fact pattern, the battery offtake arrangement gives the electricity retailer the economic benefits derived from the battery’s storage capacity.  This is because the electricity retailer has the exclusive right to use the entire capacity of the battery throughout the period of use and direct the battery owner as to whether, when and by how much to charge and discharge the battery.

Entities are generally expected to apply accounting policy changes from an IFRIC agenda decision in their next financial statements, although sufficient time is allowed to assess and implement any necessary changes.

The full list of new agenda decisions is set out below:

• Assessment of a specified main business activity for the purposes of the separate financial statements of a parent (IFRS 18)
• Classification of a foreign exchange difference from an intragroup monetary liability (or asset) (IFRS 18)
• Classification of gains and losses on a derivative managing a foreign currency exposure (IFRS 18)
• Economic benefits from use of a battery under an offtake arrangement (IFRS 16)
• Fair presentation and compliance with IFRS Accounting Standards (IAS 1) [IAS 8]
• Scope of the requirement to disclose expenses by nature (IFRS 18)

Further ASX guidance on sustainability reporting

The ASX has released an update further explaining the interaction of the ASX Listing Rule requirements with mandatory sustainability reporting.

The update explains that entities may release their corporate governance statement and Appendix 4G at the same time as their sustainability report and audited financial statements, rather than including them in the ‘glossy’ annual report. 

The ASX accepts this practice as there may be some common content across the sustainability report and corporate governance statement.

The corporate governance statement and Appendix 4G do not need to be lodged again with the annual report where they have already been lodged at the same time as the audited financial statements.

ISSB decides on nature-related disclosures project direction

The ISSB has decided to progress its nature-related disclosures project in the form of an IFRS Practice Statement.

The ISSB considered four different approaches at its April 2026 meeting, ultimately deciding to pursue an IFRS Practice Statement and request feedback on its decision.

The ISSB chose an IFRS Practice Statement because it provides clear, due‑process guidance on how to apply existing requirements (in IFRS S1 and IFRS S2) to nature-related disclosures without changing the Standards themselves.

The ISSB considers that this approach minimises disruption while entities are still implementing IFRS S1 and S2. It also offers flexibility for jurisdictions, including the option to mandate its adoption, and allows the ISSB to support high-quality, consistent reporting now while retaining the option to introduce a formal Standard later.

New TIG decisions page available

The IFRS Foundation has published an online log of questions presented to the Transition Implementation Group on IFRS S1 and IFRS S2 (TIG).  The log includes questions that can be answered by applying the wording in IFRS S1 and IFRS S2, where no separate paper was prepared for TIG discussion.

Entities implementing sustainability reporting may find this a useful resource for answering implementation questions.