Announcing its focus areas for 30 June 2019 financial reports of listed entities and other entities of public interest with many stakeholders, ASIC has called on companies to focus on new requirements that can materially affect reported assets, liabilities and profits.
New accounting standards
Major new accounting standards will have the greatest impact on financial reporting for many companies since the adoption of International Financial Reporting Standards (IFRS) in 2005.
Full-year reports at 30 June 2019 must comply with new accounting standards on revenue recognition and financial instrument values (including hedge accounting and loan loss provisioning).
The reports must also disclose the future impact of new lease accounting requirements. There are also new standards covering: accounting by insurers; and the definition and recognition criteria for assets, liabilities, income and expenses.
ASIC Commissioner John Price said, ‘New accounting standards can significantly affect results reported to the market by companies, require changes to systems and processes, and affect businesses.’
It is important that directors and management ensure that companies inform investors and other financial report users of the impact on reported results. Required disclosure on the effect of the new standards is more extensive than that made by many companies for the 31 December 2018 half year.
ASIC will be reviewing more than 200 full year financial reports at 30 June 2019 to promote quality financial reporting, and useful and meaningful information for investors.
Other considerations
Directors are primarily responsible for the quality of the financial report. This includes ensuring that management produces quality financial information on a timely basis. Companies must have appropriate processes, records and analysis to support information in the financial report.
Companies should apply appropriate experience and expertise, particularly in more difficult and complex areas such as accounting estimates (including impairment of non-financial assets), accounting policies (such as revenue recognition) and taxation.
Further information can be found in ASIC Information Sheet 183 Directors and financial reporting (INFO 183) and ASIC Information Sheet 203 Impairment of non-financial assets: Materials for directors (INFO 203).
