ASIC is asking directors & preparers of annual and half-year reports and auditors to assess whether companies’ 2022 annual and half-year financial reports are providing useful and meaningful information for investors and other users alike. ASIC details the main areas of focus for this company reporting period.
ASIC Commissioner Sean Hughes said, ‘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.’
ASIC has highlighted a number of areas for attention, in particular:
- asset values
- provisions
- solvency and going concern assessments
- events occurring after year end and before completing the financial report
- disclosures in the financial report and Operating and Financial Review (OFR).
ASIC notes companies will be affected differently depending on their industry, where they operate, how their suppliers and customers are affected, and a range of other factors.
Uncertainties may lead to a wider range of valid judgements on asset values and other estimates. These uncertainties may change from period to period. And as such, disclosures in the financial report about uncertainties, key assumptions and sensitivity analysis will be important to investors and the like.
The Operating and Financial Review (OFR) should complement the financial report and tell the story of how the entity’s businesses are impacted by both COVID-19 and other external factors. The underlying drivers of the results and financial position should be explained, as well as risks, management strategies and future prospects investigated. Forward-looking information should have a reasonable basis and the strategies should be updated through continuous disclosure if circumstances change.