As the end of financial year draws near, the corporate regulator has warned companies their disclosures should be “useful and meaningful” in the face of ongoing COVID-related uncertainty.
In a statement, ASIC revealed its key focus areas for company financial reports in the 2021 financial year, saying it expected directors and auditors to pay close attention to asset values and provisions, disclosures, solvency and going concern assessments, and events occurring before and after year end.
“As COVID-19 conditions continue to evolve, the quality of financial reports and related disclosures remain more important than ever for keeping investors informed,” ASIC commissioner Cathie Armour said.
“The circumstances of companies and the environment in which they operate can change significantly from one reporting period to the next. This could significantly affect assessments of asset values and financial position.
“Disclosing key assumptions, risks, the drivers of results, management strategies and future prospects will be important for investors and other users of financial reports. This includes both full-year and half-year reports.”
With fresh outbreaks having hit Victoria and Queensland last week, the regulator said uncertain future economic conditions would continue to impact businesses.
“Assumptions underlying estimates and assessments for financial reporting purposes should be reasonable and supportable,” ASIC said.
“Useful and meaningful disclosures about business impacts and potential uncertainties will continue to be vital. Uncertainties may lead to a wider range of valid judgements on asset values and other estimates.”
The regulator said directors and auditors should also be given sufficient time in the reporting process to “challenge assumptions, estimates and assessments” made by company management.
“Directors should make appropriate enquiries of management to ensure that key processes and internal controls have operated effectively during periods of remote work,” ASIC said.
“Where possible, auditors should be given access to perform procedures on-site rather than remotely, including stock counts and system walk-throughs.”
The regulator said it would conduct its regular review of larger listed entities’ reports as at 30 June, with a focus on “entities and industries more affected by the current conditions”.
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