ASIC focus areas for 30 June 2022 financial reports

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.
• Estimation uncertainties must be disclosed, together with sensitivity analyses on probability-weighted scenarios.

Values of property assets

• Factors that could adversely affect values of commercial and residential properties should be considered, including:
  • Changes in the office space needs of tenants due to more flexible work arrangements
  • Online shopping trends
  • Future economic and industry impacts on tenants
  • Financial condition of tenants
  • Restructured lease agreements.
• Complex lease accounting requirements, treatment of rent concessions by lessors and lessees, and impairment of lessees’ right-of-use assets.

Note: Refer to our Lease Accounting webpage for 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 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.
• 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.

Value of other assets

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

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 financial report

• Disclose uncertainties and sensitivity analyses for key assumptions.
• 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 OFR

• The OFR should complement the financial report and ‘tell the story’ of how the business has been impacted by the COVID-19 pandemic and changing circumstances.
• Explain underlying drivers of results and financial position, as well as the risks, management strategies, and future prospects.
• The most significant business risks at the whole-of-entity level. Refer to the note below for more information.
• Climate change risk could have a material impact on future prospects. Directors should consider disclosing information under recommendations of the Task Force on Climate-Related Financial Disclosures.

Note: The Media Release notes that disclosing an exhaustive list of genetic risks that might potentially affect a large number of entities is not helpful. It emphasises that the OFR should include a discussion on environmental, social and governance (ESG) risks, and these risks should be described in context. For example, it could include discussion about:

• Why the risk is important or significant
• Potential impact of the risk
• Where relevant, factors that are within management’s control.

Assistance and support by government and others (e.g. lenders and landlords)

• Prominently disclose in the financial report and OFR:
  • Material amounts
  • Duration of support
  • Impact of its discontinuance.
• For example: JobKeeper, land tax relief, loan deferrals and restructuring, and rent deferrals and waivers.

Non-IFRS financial information

• Should not be presented in a misleading manner.
• If asset impairment losses were excluded from a non-IFRS profit measure in a previous year, then reversals of impairment should also be excluded from the non-IFRS profit measure in subsequent years.

Disclosure in half-year financial reports

• May need to include disclosure about significant developments and changes in circumstances since the 31 December 2021 half-year financial reports.