ASIC's focus on financial reporting

With the end of the 2010/11 financial year fast approaching, senior management and staff involved in the financial reporting process need to consider the various matters that have been highlighted as areas of concern by ASIC in their recent review of financial reports for 30 June 2010, which encompassed not only 250 listed entities but also 100 unlisted entities.

In current economic conditions, reviews of the financial reports continue to focus on going concern assumptions, asset impairments and fair values of assets.

A new area of focus for ASIC this year has been the reporting of performance. ASIC reviewed the quality of the Operating and Financial Review section of the annual reports and the use of non-statutory financial information for 50 of the top 200 listed companies. ASIC also paid attention to the segment reporting disclosures and the classification of items within total comprehensive income, for the full 350 entities in their study.

ASIC’s reviews highlighted a number of areas deserving greater attention, including presentation of information on the key components of results and a meaningful analysis of the underlying drivers of statutory profit. The extensive surveillance report provided detailed comment on:

• reporting performance and business drivers (operating and financial review, alternative profits and segment reporting) 
• control and significant influence 
• current market conditions (going concern, asset impairment, fair value of assets, financial instrument disclosures, current vs. non-current classifications and disclosures for estimates and accounting policy judgements) 
• other matters (business combinations, debt vs. equity, other comprehensive income)

Further details on ASIC’s 30 June 2010 reviews and areas of focus for December financial reports is available on the ASIC website.

Should you wish to discuss these changes further, please do not hesitate to contact your usual Grant Thornton advisor or a member of the National Audit Support team at NationalAudit.Support@au.gt.com.

Author: Keith Reilly, March 2011

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