Recent ASIC media releases – Focus areas under COVID-19 and results of December 2019 financial reporting surveillance

When preparing 30 June 2020 financial statements, Australian entities should also be cognisant of ASIC’s recent media releases outlining:

  • Focuses for financial reporting under COVID-19 conditions (MR 20-157)
  • ASIC review of 31 December 2019 financial reports (MR 20-173).

Focus areas under COVID-19

These are outlined in the Attachment to MR 20-157 and provide pointers for directors, preparers and auditors to consider for June 2020 financial reports including:

  • General factors affecting asset values, provisions and assessments of solvency and going concern
  • Asset values – impairment of non-financial assets, values of property assets, expected credit losses on loans and receivables, and values of other assets
  • Provisions – onerous contracts, financial guarantees and restructuring
  • Subsequent events
  • Disclosures
  • Reporting processes to substantiate judgements on accounting estimates and forward-looking information at the time they are made in order to reduce the risk of using ‘hindsight’
  • Other matters such as hedge ineffectiveness, sales returns and off-balance sheet exposures.

Please refer to MR 20-157 for more information.

Results of December 2019 financial reporting surveillance

The results for December 2019 surveillance and areas subject to enquiries outlined in (MR 20-173) cover similar topics to previous years, and in addition to COVID-19 focus areas outlined above, these would also be expected to be on ASIC’s ‘radar’ for 30 June 2020 financial statements.

The table below summarises the areas where ASIC made enquiries of entities about their accounting treatments, although these would not necessarily all lead to restatements:

Matter Number of enquiries Enquiries cover…
Revenue recognition 10
  • Multiple performance obligations with some still outstanding
  • Accounting policies for revenue recognition need to be more clearly described
Impairment and other asset values 9
  • Reasonableness of cash flows and assumptions
  • Determining the carrying amount of CGUs
  • Fair value determined using discounted cash flows dependent on a large number of management inputs
  • Impairment indicators ignored
  • Insufficient disclosures regarding estimation uncertainty and key assumptions used
Tax accounting 4
  • Probability of recovery of deferred tax assets relating to tax losses
Provisions 4
  • Adequacy of provisions for rehabilitation, warranty claims and employee benefits
Financial instruments 4
  • Fair value of equity instruments
  • Fair value gains from debt forgiveness
Consolidation and equity accounting 4
  • Non-consolidation of other entities
  • Not equity accounting where there are indicators of possible significant influence
Business combinations 1 N/A
Leases 1
  • Providing clearer explanations of the impact of adopting IFRS 16 for the first time
  • Sale and leaseback of property
Other matters 3 N/A
Total 40  

Please refer to MR 20-173 for more information.

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