ASIC calls for improved disclosure about material business risks in directors’ reports
ASIC calls for improved disclosure about material business risks in directors’ reports
The Australian Securities and Investments Commission (ASIC) continues to call out entities whose disclosure about material business risks is insufficient, including five that provided additional business risk disclosures during October and November 2022 (see Media Release 22-332), and most recently, another four since (see Media Release 23-018). The additional information was made available either in AGM presentations, business updates or corporate governance updates.
Why disclose material business risks?
Section 299A(1) of the Corporations Act 2001 requires listed entities to include a discussion in their directors’ report or OFR which contains information that members of the listed entity would reasonably require to make an informed assessment of:
- The operations of the entity reported on
- The financial position of the entity reported on
- The business strategies, and prospects for future financial years, of the entity reported on.
Although s299A(1) does not specifically refer to discussing business risks in the OFR, ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review (RG 247) notes that it is important that the discussion about future prospects is balanced. That is, it is likely to be misleading to discuss future prospects without also discussing material business risks that could adversely affect the entity achieving those prospects.
ASIC suggests preparers of the OFR review the additional disclosures being made in the OFR of other listed entities as they may assist them to improve their own disclosure.
More information
Our November 2022 Corporate Reporting Insights article provides more information about material business risks – what they are, and how they should be disclosed.
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