Highlighting the crucial importance of properly informed financial reports, especially under COVID-19 conditions, ASIC has highlighted key areas companies must pay attention to when completing their reports for the period ending 31 December.
In a statement issued on Thursday, the corporate regulator asked directors, despite uncertainties about future economic and market conditions, to focus particularly on asset values, provisions, solvency and going concern assessments, events occurring after year end and before completing the financial report, and disclosures.
“COVID-19 conditions have continued through 2021 and 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,” said ASIC commissioner Sean Hughes.
“It remains more important than ever that investors and markets are properly informed through a company’s financial reports and related disclosures about underlying drivers of results, key assumptions, strategies, future prospects and risks in both full-year and half-year reports,” Mr Hughes added.
Acknowledging the many unknowns, ASIC said assumptions underlying estimates and assessments for financial reporting purposes should be reasonable and supportable.
Detailing particularly the importance of disclosures in financial reports, ASIC said they may lead to a wider range of valid judgements on asset values and estimates.
“This will assist investors in understanding the approach taken, understanding potential future impacts and making comparisons between entities,” the corporate regulator explained.
“Entities should also explain where uncertainties have narrowed or changed since the previous full-year and half-year financial reports.”
Additionally, the corporate regulator outlined the importance of the OFR in complementing a financial report and said it should “tell the story of how the entity’s businesses are impacted by both the COVID-19 pandemic and by non-COVID-19 factors”.
ASIC recently announced a one-month deadline extension for unlisted entities lodging financial reports for balance dates between 24 December 2021 to 7 January 2022.
