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ASIC’s financial reporting focus areas and guidance

ASIC has released its financial reporting focus areas for reporting periods ending 30 June 2022, calling on directors, preparers and auditors to assess whether annual and half-year financial reports provide useful and meaningful information for investors and other users.

These focus areas include asset values, provisions, solvency and going concern assessments, subsequent events, disclosures in the financial report and the Operating and Financial Review (OFR).

This blog covers each of these focus areas, the guidance provided by ASIC, various considerations for directors and those who prepare financial reports, and the reporting process.

Changing market conditions and performance

In its release, ASIC has noted that “many companies are facing changing market conditions and uncertainties. Directors and preparers should assess the impact on current and future performance, asset values and provisions. They should also ensure that increasing demands for better information for investors on uncertainties, key assumptions, business strategies and risks are met as required under the existing reporting regime for both annual and half-year reports.”

The changing and uncertain future economic and market conditions may impact companies differently, depending on their industry, where they operate, how their suppliers and customers are affected, and a range of other factors. Given these conditions and uncertainties, assumptions, underlying estimates and assessments for financial reporting purposes should be given added focus to ensure they are reasonable and supportable.

Directors and management should assess how the current and future performance of a company, the value of its assets and its provisions, and business strategies may be affected by changing circumstances, uncertainties and risks such as, but not limited to:

  • COVID-19 conditions and restrictions during the reporting period in local and foreign jurisdictions;

  • Changes in customer preferences and online purchasing trends;

  • Increased use of virtual meetings and flexible working arrangements;

  • The discontinuation of financial and other support from governments, lenders and lessors, including any possible increases in the level of insolvencies;

  • The availability of skilled staff and expertise;

  • The current rising interest rate environment and its impact on future cash flows and on discount rates used in asset and liability valuations;

  • Increases in oil and energy prices;

  • Geopolitical risks;

  • Commitments and policies on climate and carbon emissions by governments in local and foreign jurisdictions;

  • Technological changes and innovation; and

  • Legislative and regulatory changes;

Uncertainties may lead to a wider range of valid judgements on asset values and other estimates. These uncertainties may change from period to period. Disclosures in the financial report about such uncertainties, risks, key assumptions and sensitivity analysis will be important to investors and other users.

Financial Reporting Focus Areas

The following table includes ASIC’s focus areas, the guidance provided and various considerations for directors and preparers of financial reports:

ASIC Focus Area

ASIC Guidance

Considerations for Directors and Preparers

Asset Values

Impairment of non-financial assets:

  • Annual testing for impairment of goodwill, indefinite useful life intangible assets and intangible assets not yet available for use. Entities adversely impacted in the current environment may have new or continuing indicators of impairment that require impairment testing for other non-financial assets.

  • The appropriateness of key assumptions supporting the recoverable amount of non-financial assets.

  • Disclosure of estimation uncertainties, changing key assumptions, and sensitivity analysis or information on probability-weighted scenarios. Key assumptions may include assumptions relating to the factors listed in the covering release.

  • Update of budgets, forecasts and other projections for the continuing effects of Covid-19 and other geopolitical risks.

  • Review of impairment models to ensure volatility and other inputs are current and appropriate

  • Accuracy and recency of assumptions used in calculation of recoverable amounts.

  • Alternative valuation method to the primary method, and availability of information thereof, which may be used for comparison purposes.

  • Availability of information that can be used to calculate recoverable amounts using an alternate valuation method or technique which can serve as a point of comparison to the values derived in the primary method selected.

  • Disclosure of assumptions that have a significant risk of requiring material impairment adjustment in the next 12 months.

  • ASX continuous disclosure obligations of suspected impairment (refer to ASX Listing Rules – Guidance Note 8 ‘Continuous Disclosure).

Asset Values

Values of property assets:

  • Factors that could adversely affect commercial and residential property values should be considered such as changes in office space requirements of tenants, online shopping trends, future economic or industry impacts on tenants, the financial condition of tenants and restructured lease agreements.

  • The lease accounting requirements, the treatment of rental concessions by lessors and lessees, and the impairment of lessee right-of-use assets.

  • Impact of changing market conditions on valuation assumptions and inputs.

  • Factors that may adversely affect the fair values of commercial properties such as increase in flexible work arrangements.

  • Impact of rent concessions in accounting for lease contracts as lessees and lessors.

  • AASB 13 ‘Fair Value Measurement’ disclosure requirements in annual financial report. This includes valuation techniques and inputs for recurring/non-recurring measurements of assets and liabilities, and the effect on profit or loss or other comprehensive income of significant recurring unobservable inputs.

Asset Values

Expected credit losses on loans and receivables:

  • Whether key assumptions used in determining expected credit losses are reasonable and supportable.

  • Any need for more reliable and up-to-date information about the circumstances of borrowers and debtors.

  • Short-term liquidity issues, financial condition and earning capacity of borrowers and debtors.

  • The extent to which past credit losses remain relevant in assessing expected credit losses (ECLs).

  • Disclosure of estimation uncertainties and key assumptions.

  • The appropriateness and reasonableness of key assumptions and judgements in estimating ECLs.

  • Impact of changing circumstances on inputs to models.

  • Appropriateness and recency of assumptions used in determining whether there has been a significant increase in credit risk.

  • Impact of short-term liquidity issues, financial condition and earning capacity of borrowers and debtors in the measurement of loans and receivables.

  • Events occurring post reporting date and before authorising the financial report.

  • Disclosure of estimates and

  • judgements used in the measurement of ECLs.

Asset Values

Values of other assets:

  • The net realisable value of inventories, including whether all estimated costs of completion and necessary to make the sale have been considered in determining net realisable value.

  • Whether it is probable that deferred tax assets will be realised.

  • The value of investments in unlisted entities.

  • Obsolete or excess inventory.

  • Disclosure of significant write-downs of inventory.

  • Impact of changing economic conditions on the recoverability of deferred tax assets.

  • Update of budgets, forecasts and other projections and their impact on the recoverability of deferred tax assets.

  • Reliability and appropriateness of valuation techniques used for investments in unlisted entities, particularly where there are little or no market transactions or comparable assets.


Onerous contracts, restructuring provisions and financial guarantees:

Consideration should be given to the need for and adequacy of provisions for matters such as onerous contracts, leased property make good, mine site restoration, financial guarantees given and restructuring.

  • Whether any contracts, such as revenue, have become onerous.

  • Whether conditions have been met for the recognition of restructuring provision.

  • Adequacy of ‘make good’ and restoration provisions.

  • Initial recognition and measurement of financial guarantees issued and reassessment of measurement in accordance with the requirements of IFRS 9 ‘Financial Instruments’

Subsequent Events

It is important that directors and management evaluate all events that occur after their reporting date and before authorising the financial report for issue and assess:

  • Which of those events provide additional evidence of conditions that existed at the reporting date and for which financial statements need to be adjusted?

  • Which of those events relate to conditions that arose after the reporting date, and if material, require disclosure only?​

  • Assessment of events that occur after the reporting date, and before authorising the release of the financial report, to determine whether they are adjusting or non-adjusting events.

  • Impact of adjusting events on estimates and judgements made in the financial report (e.g. impairment of financial assets).

  • Disclosure of nature and estimated financial effect of non-adjusting events.

Disclosures in the Financial Report

General considerations:

  • When considering the information that should be disclosed in the financial report and OFR, directors and preparers should put themselves in the shoes of investors and consider what information investors would want to know.

  • Disclosures should be specific to the circumstances of the entity and its businesses, assets, financial position and performance.

  • Changes from the previous period should be considered and disclosed.

  • Disclosure about the impact of uncertainties and risks due to changing economic conditions and geopolitical events.

  • Industry-specific circumstances and/or conditions

  • Changes in business operations

  • Impact of technology

Disclosures in the Financial Report

Disclosures in the financial report:

  • Uncertainties may lead to a wider range of valid judgements on asset values and estimates. The financial report should disclose uncertainties, changing key assumptions and sensitivities. This will assist investors in understanding the approach taken, understanding potential future impacts and making comparisons between entities. Entities should also explain where uncertainties have changed since the previous full-year and half-year financial reports.

  • The appropriate classification of assets and liabilities between current and non-current categories on the statement of financial position should be considered. That may have regard to matters such as maturity dates, payment terms and compliance with debt covenants.

  • Explanation about the impact of uncertainties on estimates.

  • Ensuring that disclosures made are specific to the assets, liabilities, income and expenses of the entity.

  • Assumptions that have a significant risk of resulting in a material change in the carrying amount of assets and liabilities in the next 12 months.

  • Explanation of accounting policy choices that involve significant judgement.

  • The impacts of sensitivity analysis on calculations and need for disclosure thereof.

  • Taking into account all available information when determining the classification of assets and liabilities between current and non-current.

Disclosures in the Financial Report

Disclosures in the OFR:

  • The Operating and Financial Review (OFR)[i] should complement the financial report and provide information about the impact of both COVID-19 and non-COVID-19 factors on the entity’s business(es). The underlying drivers of the results and financial position should be explained, as well as risks, management strategies and future prospects. Forward-looking information should have a reasonable basis and the market should be updated through continuous disclosure if circumstances change. Further guidance can be found in ASIC’s Regulatory Guide RG 247Effective disclosure in an operating and financial review’.

  • Explanation of the underlying drivers of results and financial position, the risks, management strategies to address the risks and future prospects in the OFR.

  • The impact of climate change[ii] and other key risks on governance, business model, strategy, risk management, and performance and prospects.

  • Consistency of information included in the OFR with the key judgements, estimates and assessments made in the financial report.

  • Ensuring any non-IFRS profit measures in the OFR or market announcements are not presented in a potentially misleading manner.

Solvency and Going-Concern Assessments

Uncertainties and risks that may affect assessments of solvency and going concern.

  • Factors that may be taken into account in the assessment may include, but are not limited to:

o Industry-specific factors

o Local and overseas economic conditions

o Exposures to overseas operations, transactions and currencies

o Discontinuation of financial and other support from governments, lenders and lessors

o Short-term versus long-term conditions

o Debt refinancing, borrowing covenants, lender forbearances and liquidity support

  • Assessments of solvency and going concern to include conditions existing at the date of releasing the financial report and expectations of future events.

  • Disclosure of key assumptions supporting the going concern basis where significant judgements have been applied.

Other Matters

  • Assistance and support from others

  • Off-Balance Sheet Exposures

  • Registered Scheme financial statements

  • Surveillance

  • Importance of disclosure in half-year financial reports and directors’ reports.

  • Appropriate accounting of support and assistance from government, lenders, landlords and others during the reporting period.

  • Whether off-balance sheet exposures should be recognised on-balance sheet, included interests in non-consolidated entities.

  • Ensuring the recognition of assets, liabilities, income and expenses in registered scheme balance sheets and income statements where individual scheme members have pooled interests in assets and returns with some or all other members in substance.

  • ASIC has stated that it will review the full-year financial reports of selected larger listed entities and other public interest entities as at 30 June 2022.

  • Information on significant developments and changes in circumstances since 31 December 2021.

The reporting process

ASIC has highlighted the importance of applying appropriate experience and expertise in the reporting process, particularly in more difficult and complex areas, such as asset values and other estimates.

It is essential that directors consider reporting issues and make appropriate enquiries about assumptions, estimates and assessments. In addition, directors should focus on whether key processes and internal controls have operated effectively during periods of remote work.

The circumstances in which judgements on accounting estimates and forward-looking information have been made, and the basis for those judgements, should be properly documented at the time and disclosed as appropriate.

How we can help

Hall Advisory can assist you with your financial reporting requirements in the following areas:

  • Preparation of your annual and half-year financial reports to ensure they comply with the Corporations Act, accounting standards and other authoritative pronouncements; and

  • Review and update of annual and half-year financial reports to ensure they provide information that is useful and meaningful to investors and other users.

  • In addition, our team of experts can assist you with your ongoing accounting needs as follows:

  • Preparation or review and update of accounting policies to ensure they remain compliant with accounting standards and regulatory developments, are fit for purpose and useable;

  • Interpretation of changes to accounting standards and implementation of such changes to reporting systems and processes;

  • Independent review, uplift and documentation of reporting procedures; and

  • Training services in relation to financial reporting requirements, including accounting for financial instruments, superannuation entities, income taxes and other accounting standards.

If you need support in any of these areas, contact usfor a confidential, no-obligation consultation.



[i] The OFR is included by listed entities in their annual report, setting out information that shareholders or unitholders would reasonably require to assess the entity's operations, financial position, and business strategies and prospects for future financial years.

[ii] Task Force on Climate-related Financial Disclosures’ (TCFD) Recommendations and Guidance: TCFD Report The TCFD’s recommendations address four key pillars: governance, strategy, risk management and metrics & targets. They aim at promoting consistent disclosures that will help financial market participants understand their climate-related risks.


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