Findings from ASIC’s financial reporting surveillance 2024-2025

The Australian Securities and Investments Commission (ASIC) published its findings from its financial reporting surveillance program, covering the period 1 July 2024 to 30 June 2025. The findings, contained in Report 819 ASIC’s oversight of financial reporting and audit 2024-25 (Report 819), largely highlight similar ‘problem areas’ we saw in last year’s report.

Approach and statistics

ASIC uses a risk-based approach to target financial reports for review. ASIC may then decide to also review the audit file where it is concerned that a financial report may have a risk of material misstatement. In this cycle, ASIC reviewed 254 financial reports, contacting 22 entities, with 18 of these entities making 19 changes to their financial reports (shown in Figure 1 below and extracted from Report 819):

Observations

Report 819 fleshes out ASIC’s findings and recommendations, organised into the six broad categories shown in Figure 1 above.

Operating and financial review (OFR)

Section 299A of the Corporations Act 2001 requires listed entities to include an OFR as part of their directors’ report. It should provide information that shareholders would reasonably require to make an informed assessment of the entity’s operations, financial position, business strategies and prospects for future financial years.

ASIC found that many entities still need to improve their OFR reporting. ASIC contacted 13 listed entities about the absence of disclosure about material business risks, with 12 making additional disclosures or undertaking to do so in their next financial report.

Impairment and asset values

ASIC contacted five listed entities about their compliance with AASB 136 Impairment of Assets, including:

• How they assessed impairment indicators
• Whether key valuation assumptions were reasonable and supportable
• How goodwill was allocated to cash-generating units (CGUs) and associated disclosures.

As a result, one of these entities adjusted its financial report by impairing assets by US$793.81 million.

Financial report disclosures

ASIC contacted three large proprietary companies.  Two of them failed to consolidate subsidiaries , and the third did not prepare a cash flow statement or disaggregate balance sheet totals in the notes to the financial statements.

Non-IFRS profit information

ASIC contacted two listed entities because they did not provide a reconciliation of non-IFRS profit information to statutory profit . One agreed to add the reconciliation in its next annual report and the other provided this information in its interim financial report.

Revenue recognition

ASIC contacted two listed entities about their revenue recognition policies. One entity presented capitalised wages as other income in profit or loss, giving the appearance of an additional revenue source. This presentation format was adjusted in the next financial report. The other inquiry related to principal versus agent revenue recognition considerations, with no adjustments required.

Previously grandfathered large proprietary companies

ASIC also wrote to 58 previously grandfathered proprietary companies, which it assessed, based on data, were large proprietary companies that should have lodged audited financial reports.  ASIC found that 32 of these companies failed to lodge, and as a result of its intervention, 30 of this cohort have now lodged their financial reports.

Sustainability reporting

During the 2024-2025 review period, ASIC also monitored voluntary reporting by listed entities on sustainability and climate-related disclosures. Of the 254 financial reports reviewed, 105 included sustainability-related information, with only five voluntarily reporting against AASB S2 Climate-related Disclosures. The frameworks used are:

Sustainability reporting framework	Times used
Taskforce on Climate-Related Financial Disclosures (TCFD)	47
Global Reporting Initiatives	17
UN Sustainable Development Goals	10
Sustainability Accounting Standards Board	6
Australian Sustainability Reporting Standards	5
Taskforce on Nature-Related Financial Disclosures	4
National Greenhouse and Energy Reporting Act 2007	3
Other	5
Note: Some entities use more than one sustainability reporting framework

Source: Report 819 - Table 1: Sustainability frameworks used

ASIC also reviewed voluntary climate-related disclosures of an additional 41 entities from public disclosures, and expects mandatory reporting under the Corporations Act and AASB S2 to address many of the current challenges. Key points noted were:

• Listed companies generally provided more extensive voluntary disclosures than large unlisted entities, likely due to greater shareholder demand
• Most large companies disclosed Scope 3 emissions using a mix of direct supplier/customer data and secondary data such as industry averages
• The quality of voluntary disclosures was mixed: disclosures were often repetitive, with key information about climate risk management sometimes unclear or hard to find
• Scenario analyses often lacked detail on assumptions
• Transition plans were not always clearly linked to targets, actions and strategies
• Forward-looking statements were mostly qualitative with limited explanation of the financial impacts.

Regulatory Guide 280 Sustainability reporting provides more information about which entities must prepare a sustainability report and when, as well as ASIC’s pragmatic and proportional approach to administering the new sustainability reporting regime during the phase-in period.

ASIC’s expectations

The Report notes ASIC’s expectations regarding its financial reporting surveillance findings. All stakeholders in the financial reporting chain should carefully consider them, as well as ASIC’s focus areas for 30 June 2025. Audit committees, directors and preparers of financial reports have a critical and ongoing role in supporting high-quality financial reporting, and the key foundational building blocks they need to support this include:

• High-quality and timely financial information – supported by robust position papers for difficult or contentious matters, accompanied by technical analysis and conclusions referencing accounting standards
• Adequate resources, skills and expertise applied in the financial reporting process – position papers should support conclusions reached, particularly in areas that involve significant estimation uncertainty and judgement (e.g. for asset values, revenue recognition and provisions).

We are here to help

Avoiding ASIC scrutiny on financial reporting matters is crucial to prevent adjustments to financial reports, reputational issues and loss of investor confidence. So, it’s best to stay out of harm’s way and avoid the distraction of an inquiry. BDO can help ensure your financial reports are in top shape, allowing you to focus on your day-to-day business. Please contact our IFRS & Corporate Reporting team if you need help.