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ASIC releases guidance for preparation of 31 December financial reports

What’s new?

From a review of 30 June 2008 financial reports, ASIC has identified key areas of focus and specific issues that should be addressed to comply with relevant accounting standards in the upcoming 31 December financial report.

Some of the areas ASIC will be focusing on are:

Going Concern

Given the extent and nature of current market conditions, directors should focus on the appropriateness of the going concern assumption when preparing their 31 December financial report. Their assessment should take into account reduced liability, ability to refinance debt and compliance with lending conventions.

Impairment of assets processes

ASIC expects further write-downs since the 30 June reporting period.

ASIC emphasises that entities should maintain a strong focus on impairment of intangibles and other assets not reported at fair values, this includes recently acquired assets. This process must be robust and transparent for investor confidence in reported asset values.

Determination of fair values

ASIC advises entities to make maximum use of market based information, including any exposure to changes in the value of assets held by sponsored defined benefit superannuation funds. Directors are asked to fully disclose their methods and assumptions.

Off balance sheet arrangements

In ASIC’s recent review, financial reports and public information for some entities indicted possible existence of off balance sheet arrangements, with no explanation provided in the financial report of nature, scale, size or reason for non-inclusion on the balance sheet.

In the upcoming report, ASIC will ask entities to address why they have chosen not to include assets and liabilities.

New financial instrument disclosures

ASIC is asking entities to review the adequacy of their financial instrument disclosures. ASIC expects entities to provide information to explain the risks associated with financial instruments, and how they are managed.

ASIC advises that 31 December financial reports should focus on the information needs of external report readers and include meaningful information and disclosure so a proper understating of the business and the risks it faces can be ascertained.

For further information:

Certainty Compliance can help you understand your reporting requirements. Please contact your Certainty consultant at (02) 9238 8091 or enquiries@certaintycompliance.com.au

ASIC Media Release: 08-218