Key focus areas for ASIC’s 30 June 2025 financial reporting surveillance

The Australian Securities and Investments Commission (ASIC) conducts surveillance on the full-year and half-year financial reports of Australian entities as part of its financial reporting surveillance program. The surveillance program covers listed entities, other economically significant public interest entities, previously ‘grandfathered’ large proprietary limited companies, and registered superannuation entities. As a result of these risk-based reviews, ASIC conducts inquiries on matters of concern, and depending on the outcome, ASIC may request companies to make changes to their financial reports or improve disclosures.

In its recent media release, ASIC outlined its focus areas for its surveillance of 30 June 2025 financial reports, highlighting the most significant or common instances of past non-compliance with Australian Accounting Standards, as well as emerging areas posing significant challenges for financial statement preparers. The focus areas of other regulators, like the European Securities and Markets Authority (ESMA), are consistent with ASIC, but go further to focus on liquidity disclosures, such as for supplier finance arrangements and debt covenants.

Directors, preparers, and auditors should collectively pay particular attention to these focus areas to improve financial reporting and audit quality. They should also ensure that they have robust position papers with appropriate analysis and conclusions to support complex and judgemental areas of accounting. These should refer to Australian Accounting Standards.

Revenue recognition

Revenue recognition is a new area ASIC will focus on when reviewing 30 June 2025 financial reports. While ASIC has not provided details of areas within revenue recognition it will be looking at, we expect it to focus on aspects of AASB 15 Revenue from Contracts with Customers where revenue recognition spans multiple periods. That is, the focus is likely to be on:

  • Step 2 – Identifying separate performance obligations
  • Step 5 – Recognise revenue when each performance obligation is satisfied.

Four enduring focus areas plus revenue recognition

ASIC’s Financial reporting and audit focus areas page also highlights the following four enduring focus areas that apply to all reporting periods that it will focus on when it conducts its reviews:

  1. Asset values
  2. Provisions
  3. Subsequent events
  4. Disclosures.

Each of the above enduring focus areas is discussed in more detail below.

ASIC’s focus on asset values relates to the following areas:

Financial statement area

Focus areas

Impairment of non-financial assets

  • Must conduct an annual impairment test for goodwill, indefinite-life intangible assets, and intangible assets not yet available for use.
  • Ensure impairment tests are conducted for other non-financial assets if there are new or continuing indicators of impairment.
  • Ensure key assumptions used to determine recoverable amounts are appropriate.
  • Ensure the valuation method used to test impairment is appropriate, reasonable and supportable assumptions are used, and calculations should be cross-checked for reliability against other methods.
  • Market capitalisation is not considered an appropriate method of determining fair value. However, it may be an appropriate indicator of impairment or used in a valuation cross-check.
  • When performing a valuation cross-check, an entity may compare its ratio of market capitalisation to revenue to that of other entities if the other entities have closely comparable businesses, products, markets, cost structures, funding, etc.
  • Estimation uncertainties must be disclosed, along with any changed key assumptions. A sensitivity analysis or information about probability-weighted scenarios must also be provided.

Note: Our Impairment web page provides more information about the complexities of performing an impairment test.

Values of property assets

  • Factors that could adversely affect the values of commercial and residential properties should be considered, including:
    • Changes in the office space needs of tenants
    • Online shopping trends
    • Future economic or industry impacts on tenants
    • Financial condition of tenants.
  • Complex lease accounting requirements, including impairment of lessees’ right-of-use assets.

Note: Our Lease Accounting web page provides more information about the complexities of lease accounting, including software solutions, training materials, and publications.

Expected credit losses (ECL) on loans and receivables

  • Appropriateness of key assumptions used to determine ECL, which should be reasonable and supportable.
  • The need for more reliable and up-to-date information about borrowers’ and debtors’ circumstances.
  • Short-term liquidity issues for some borrowers and debtors, as well as their financial condition and earnings capacity.
  • Receivables ageing must be accurate.
  • Assumptions must be forward-looking, and the entity cannot simply assume that recent debts are collectible.
  • Past models and experience may not be representative of current expectations, and probability-weighted scenarios may be needed.
  • Disclosure of estimation uncertainty and key assumptions.
  • Companies in the financial services sector should have particular regard to the impact of current economic and market conditions and uncertainties on ECLs. Need to consider:
    • Whether there has been a significant increase in credit risk for particular groups of lenders
    • Adequacy of data, modelling, controls, and governance in determining ECLs
    • Disclosing uncertainties and assumptions.

Financial asset classification

  • Financial assets must be appropriately classified and subsequently measured at:
    • Amortised cost
    • Fair value through other comprehensive income, or
    • Fair value through profit or loss.
  • A financial asset can only be measured at amortised cost if (IFRS 9.4.1.2):
    • The assets are held in a business model whose objective is to hold financial assets in order to collect contractual cash flows, and
    • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Value of other assets

  • Value of inventories, including whether all estimated costs of completion and costs necessary to make the sale were considered when determining net realisable value.
  • Whether it is probable that deferred tax assets will be realised.
  • The value of investments in unlisted entities.

Entities should consider the need for, and adequacy of, provisions for onerous contracts, leased property make-good, mine site restoration, financial guarantees given, and restructuring.

Entities should review events occurring after the end of the reporting period to determine whether these are ‘adjusting’ or ‘non-adjusting’ post-balance date events.

Entities should focus on ensuring adequate disclosures as outlined in the table below.

Consider

Focus areas

General considerations

  • Put yourselves in the shoes of investors and consider what information investors would want to know.
  • Disclosures should be specific to the entity (i.e. not boilerplate).
  • Consider changes from the previous period and disclose accordingly.

Disclosures in the financial report

  • Disclose uncertainties, changing key assumptions and sensitivities.
  • Explain where uncertainties have changed since the previous full-year or half-year financial report.
  • Consider appropriate current versus non-current classification of assets and liabilities in the balance sheet, having regard to maturity dates, payment terms, and compliance with debt covenants.

Disclosures in Operating and Financial Review (OFR)

  • The OFR should complement the financial report and tell the story of how economic and market conditions have impacted the business’s results and prospects.
  • The overall picture should be clear, understandable, and supported by information that will enable investors to understand the significant factors affecting the entity, its businesses, and the value of its assets.
  • Explain the underlying drivers of results, financial position, risks, management strategies, and future prospects.
  • All significant factors should be included and given appropriate prominence.
  • The most significant business risks at the whole-of-entity level that could affect the achievement of the disclosed financial performance or outcomes should be disclosed. The OFR should discuss environmental, social and governance (ESG) risks. Disclosing an exhaustive list of generic risks that might affect many entities is not helpful, and these risks should be described in context. For example, it could include a discussion about:
    • Why the risk is important or significant
    • Potential impact of the risk
    • Where relevant, factors that are within management’s control.
  • Climate change risk could have a material impact on future prospects, and these risks need to be disclosed.
  • Cyber security risks could have a material impact and require disclosure. For example, loss of personal data or denial of service attacks could impact revenue.

Non-IFRS financial information

  • A company should not present any non-IFRS measures in a misleading manner (refer to Regulatory Guide 230 for more information) in the OFR or within any market announcements.

Disclosure in half-year financial reports

  • May need to include disclosure about significant developments and changes in circumstances since the 31 December 2024 full-year financial reports.

Additional items highlighted in the media release

ASIC also highlights the following financial reporting matters:

Previously ‘grandfathered’ large proprietary companies

This is the third year since the lodgement exemption for previously large ‘grandfathered’ proprietary companies was scrapped in 2022. Since then, ASIC has identified a number of entities in this group that have failed to lodge their financial reports since the exemption was removed and is taking appropriate regulatory action.

Registrable superannuation entities

The trustees of registrable superannuation entities (RSEs) were required to lodge their first financial report, including a remuneration report, for years ending 30 June 2024 onwards. ASIC reviewed approximately half of all 2024 reports and will review the remainder as part of its 2025-2026 financial reporting surveillance program, with the focus being on:

  • Measurement and disclosure of investment portfolios, including valuation and classification of investments
  • Disclosure of marketing and advertising expenses.

You can find more information about the financial reporting obligations of registrable superannuation entities on ASIC’s registrable superannuation entity page, and specifically, our article contains guidance on remuneration reports.

Climate-related risks

From 31 December 2025, sustainability reporting under AASB S2 Climate-related Disclosures is mandatory for Group 1 entities required to prepare and lodge financial statements under Chapter 2M of the Corporations Act 2001.

Although ASIC noted in its Regulatory Guide 280 Sustainability reporting that it will be adopting a proportionate and pragmatic approach to supervision and enforcement as sustainability requirements are being phased in, it will nevertheless be reviewing 31 December 2025 sustainability reports as part of its 2025-2026 surveillance program and will share its observations from its review to help preparers in future.

31 December 2025 is only six months away. If Group 1 entities  have not already implemented plans and procedures to meet their mandatory sustainability reporting requirements, it is now a matter of urgency that they begin work as soon as possible.

Changes to the consolidated entity disclosure statement

ASIC has updated its Information Sheet 284 Public companies to include a consolidated entity disclosure statement in their annual report for changes to the consolidated entity disclosure statement for years ending 30 June 2025 onwards. Our article contains more information about this.

Need assistance?

Please contact our IFRS & Corporate Reporting team if you need support with any financial reporting matters for your 30 June 2025 financial reports.