The Australian Securities and Investments Commission (ASIC) recently issued its focus areas for June 2022 year ends.
ASIC also announced that it reviewed 70 listed entity financial reports as part of its surveillance for 31 December 2021, ten of which were IPOs in the past 18 months
ASIC made inquiries of 18 entities on 31 matters. Ten related to insufficient disclosure of business risks in the operating and financial review (32%) and seven related to recoverability of asset values (23%)
Recognition of restoration and lease make-good provisions, revenue recognition, expense deferral and classification of debt as current or non-current also continue to be areas of inquiry
ASIC has urged directors to place greater focus on disclosure of material business risks in the operating and financial review (OFR), de-emphasising the impacts of COVID-19 in favour of broader economic risks and uncertainties like the impact of rising interest rates and oil prices, geopolitical risks (including the Ukraine/Russia conflict), discontinuation of financial support, changes in customer behaviours and availability of skilled staff and expertise
ASIC has also emphasised the disclosure of environmental, social and governance risks and ensuring consistency between disclosures in the OFR and any other voluntary climate related disclosures provided
In order to provide useful and meaningful information, in compiling the financial report it is important to provide clear disclosures of the impacts on the entity, the uncertainties the entity faces and the significant judgements and estimates made. Appropriate documentation of these assumptions can assist in protecting both management and directors.