ASIC key focus areas: 30 June 2024 financial reporting

The Australian Securities and Investments Commission (ASIC) plays a critical role in maintaining the integrity and transparency of financial reporting in Australia. Each year, ASIC conducts comprehensive surveillance on the full-year financial reports of Australian entities as part of its financial reporting surveillance program. In its recent Media Release, ASIC outlined its key focus areas for the surveillance of 30 June 2024 financial reports. This year, ASIC has expanded its program to further support financial reporting and audit quality, ensuring that entities comply with the highest standards.

Summary: Four Enduring Focus Areas

ASIC’s surveillance program has consistently emphasised four key areas to enhance financial reporting quality and transparency. These focus areas remain central to ASIC’s review of the 30 June 2024 financial reports:

Asset Values and Impairments: Ensuring that entities accurately report the value of their assets and appropriately recognise impairments, especially in volatile market conditions.

Revenue Recognition: Verifying that entities correctly apply revenue recognition principles, reflecting their true financial performance and operational results.

Expense Deferral and Provisions: Assessing whether expenses are appropriately deferred and provisions for future costs, such as warranties or restructurings, are accurately recognised.

Disclosures: Evaluating the completeness and clarity of financial disclosures, including significant accounting policies, assumptions, and estimates that affect reported financial performance and position.

Client Focus: Climate-Related Risks

As climate change continues to impact various sectors, ASIC has placed increased emphasis on the disclosure of climate-related risks. Entities are expected to provide transparent and comprehensive information on how climate change affects their operations, financial position, and future prospects. This includes disclosing the potential physical and transition risks posed by climate change, as well as any measures taken to mitigate these risks.

Suggested actions:

• Conduct thorough assessments of climate-related risks specific to their industries.
• Implement robust systems for tracking and managing these risks.
• Ensure that all relevant climate-related information is clearly disclosed in their financial reports.

Client Focus: Requirement for Consolidated Entity Disclosure Statement

ASIC’s focus on consolidated entity disclosure is another critical area for the 30 June 2024 financial reports. Entities that are part of a consolidated group must ensure that their financial statements accurately reflect the financial position and performance of the entire group. This includes:

• Providing detailed disclosures about the nature of relationships between entities within the group.
• Ensuring that all intra-group transactions are properly eliminated in the consolidation process.
• Clearly presenting the financial results and financial position of the consolidated group as a single economic entity.

We encourage clients to review consolidation procedures and ensure compliance with the latest reporting standards. Accurate and transparent consolidated financial statements are essential for stakeholders to understand the true financial health of your business.

The importance of maintaining high standards in financial reporting and audit quality

ASIC’s surveillance of the 30 June 2024 financial reports underscores the importance of maintaining high standards in financial reporting and audit quality. By focusing on key areas such as asset values, revenue recognition, expense deferral, and comprehensive disclosures, ASIC aims to enhance the reliability and transparency of financial reports. For clients of Gooding Partners, paying special attention to climate-related risks and consolidated entity disclosures will be crucial in meeting ASIC’s expectations and ensuring robust financial reporting.

If you have any questions or need further assistance with your financial reporting, please contact us.