ASIC has announced the results from a review of the 31 December 2018 financial reports of 125 entities, including 85 full-year financial reports and 40 half-year reports.
The review of half-year reports focused on the application of major new accounting standards on revenue and financial instruments.
The corporate regulator made inquiries of 26 entities on 40 matters, with impairment of non-financial assets and revenue recognition forming the largest number of inquiries.
“Directors and auditors need to focus on impairment of non-financial assets in financial reports to ensure that the market is properly informed about asset values and the expected future performance implied by those values,” ASIC said.
“There continue to be cases where the cash flows and assumptions used by entities in determining recoverable amounts are not reasonable or supportable having regard to matters such as historical cash flows, economic and market conditions, and funding costs.”
ASIC has also warned companies and auditors to focus on the impact of the new accounting standards on revenue and financial instruments, repeating its previous warnings last year.
It also previously announced its focus for 30 June 2019 financial reports, with new accounting standards on revenue recognition and financial instrument values now needed to be complied with.
“New accounting standards can significantly affect results reported to the market by companies, require changes to systems and processes, and affect businesses,” ASIC commissioner John Price said.
“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’s risk-based surveillance of the financial reports of public interest entities for reporting periods ended 30 June 2010 to 30 June 2018 has led to material changes to 4 per cent of the financial reports of public interest entities reviewed by ASIC.
The main changes related to impairment of assets, revenue recognition and expense deferral.
Jotham Lian is the news editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
With a focus on breaking news and exclusive analysis, Jotham keeps Accountants Daily readers up to date with company moves, tax updates and essential business and client strategy.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.