Clarity in corporate reporting – November 2024 monthly newsletter

Use our models to enhance your corporate reporting for the December 2024 reporting season

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

• December 2024 Tier 1 models and reporting considerations – stay ahead of the curve with our comprehensive guide on Tier 1 general purpose financial statements. Don’t miss our streamlined and enhanced sections covering all new and updated information needed for financial reporting periods ending on or after 31 December 2024. This document also outlines key developments and requirements for mandatory climate-related reporting starting from January 2025
• Model half-year report (December 2024 and June 2025) – this insightful resource is designed for entities preparing half-year reports for periods ending on or after 31 December 2024 (including 30 June 2025)
• Model special purpose financial statements – ensure your special purpose financial statements meet the highest standards with our comprehensive guide tailored for special purpose financial statements. This resource is designed for not-for-profit entities and other entities with non-legislative requirements to prepare financial statements.

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

Outcomes from ASIC’s latest financial reporting and audit surveillance

ASIC has released a report summarising the outcomes from its financial reporting and audit surveillances conducted for the period 1 July 2023 to 30 June 2024. The report is the second report using ASIC’s new integrated surveillance methodology.

Highlights

• Findings from financial reporting surveillances were largely consistent with prior periods and ASIC’s enduring focus areas, with a strong focus on the disclosure of material business risks in the operating and financial review (OFR)
• ASIC has monitored voluntary sustainability and climate change reporting of listed entities but did not identify any concerns around misleading or deceptive disclosures
• The largest area of audit findings related to the audit of revenue and receivables
• ASIC is to commence proactive surveillance focused on compliance with auditor independence and conflicts of interest requirements (and has written to auditors and CEOs of large audit firms on this matter).

Financial reporting surveillance

ASIC reviewed 188 financial reports, of which 157 were ASX listed entities and 31 were large unlisted entities.  As a result of the surveillances, ASIC contacted 39 entities in respect of 61 issues and 25 entities adjusted previously released financial information.

Key reporting areas where issues were raised include:

• The operating and financial review (OFR) (20 issues raised, 16 findings, 2 open). The main deficiency noted was a failure to provide balance by inadequately disclosing material business risks. ASIC notes that many entities need to significantly improve information reported in their OFRs for the benefit of investors (particularly retail investors) and other users. ASIC recommends OFR disclosures that are appropriate to the entity’s individual circumstances and business environment
• Impairment and asset values (14 issues raised, 3 findings, 4 open). Issues included classification of assets (current versus non-current, cash equivalents versus investments) and impairment of assets
• Non-IFRS profit information (5 issues raised, 5 findings). Three entities improved their disclosures, one entity included a reconciliation of the non IFRS measure and one entity removed a non-IFRS measure
• Financial report disclosures (5 issues raised, 1 finding, 2 open). Topics included prior year comparative information, going concern, operating segments and laws and regulations disclosures
• Revenue recognition (4 issues raised, 1 finding). Issues raised included accounting policies, where one entity adjusted their accounting policy for recognising revenue as agent versus as principal
• Share-based payments (3 issues, 1 open). Issues were raised in relation to accounting and disclosures, with one entity to amend their next financial report by reclassifying vesting expenses from options to restricted shares
• Other areas (10 issues, no findings).  Includes group accounting (including non-lodgement of consolidated financial statements), tax accounting, lease accounting and others.

Sustainability reporting

ASIC has monitored voluntary reporting on sustainability and climate change.  Most surveillance related to entities voluntary reporting under the Taskforce on Climate-Related Financial Disclosures (TCFD) recommendations.

Although areas for improvement were observed by ASIC, no concerns about misleading or deceptive disclosure were identified. ASIC’s finding will inform its ongoing work to support the introduction of mandatory climate-related financial disclosures.

Future surveillance

Going forward, ASIC's surveillance program will expand to include:

• More large proprietary companies that were previously grandfathered (including audit)
• Registrable superannuation entities (including audit)
• Climate-related risks
• Consolidated entity disclosure statements
• Auditor compliance with independence and conflicts of interest requirements.

More information

• ASIC REP 799 ASIC’s oversight of financial reporting and audit 2023-24
• ASIC 24-240MR ASIC releases FY 2023–24 financial reporting and audit report and launches auditor independence surveillance.

AASB defers amendments to AASB 10 and AASB 128

The AASB decided to further defer the amendments to AASB 10 Consolidated Financial Statements and AASB 128 Investments in Associates and Joint Ventures at its meeting held on 7 November 2024.

The amendments were initially intended to address complexities in applying AASB 10 and AASB 128, particularly related to the requirements on the sale or contribution of assets between an investor and its associate or joint venture, but challenges in their implementation led to delays and, ultimately, a deferral by the AASB.

The effective date of the amendments has now been extended to 1 January 2028, which should be disclosed as such in the financial statements, specifically in the list of new and revised Australian Accounting Standards and Interpretations on issue but not yet effective, where relevant.

In September 2024, the IASB published an exposure draft IASB/ED/2024/7 to address issues in applying the equity method, including accounting of transactions between an investor and its associate or joint venture. As this proposal is different from the previous amendments to IFRS 10 and IAS 28 (and the equivalent AASB 2014-10), the IASB is proposing to abandon the previous amendments.

ASIC issues a draft Regulatory Guide

In a 7 November media release, the Australian Securities and Investments Commission (ASIC) has released a draft Regulatory Guide 000 (RG 000), titled "Sustainability Reporting," which outlines proposed requirements for climate-related financial disclosures for entities in scope of the mandatory reporting regime. ASIC is seeking industry feedback on this draft guide through Consultation Paper 380 (CP 380). Specifically, this consultation paper seeks feedback on:

• ASIC’s proposals to issue a regulatory guide for entities required to prepare a sustainability report under Ch 2M of the Corporations Act
• ASIC’s proposals to facilitate sustainability reporting relief for stapled entities, and
• Broader questions, issues or uncertainties that may inform the approach to any future guidance.

The consultation period is open until 19 December 2024.