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ASIC highlights focus areas for 31 December 2022 reporting

In its recent media release, ASIC outlined its key areas of focus for the surveillance of 31 December 2022 financial reports. The regulator emphasized the importance of disclosing material business risks in annual reports. Directors, preparers, and auditors must take note of these guidelines to ensure that financial reports provide valuable and meaningful information for investors and other stakeholders.

ASIC Commissioner Sean Hughes emphasized that directors should ensure financial reports provide investors with relevant information regarding the impact of changing and uncertain economic and market conditions on current and future performance.

Five focus areas

ASIC has highlighted a number of key areas for reporting by companies for full and half-years ending 31 December 2022, in particular:

  • Asset values

  • Provisions

  • Solvency and going concern assessments

  • Events occurring after year-end and before the financial report is completed

  • Disclosures in the financial report and Operating and Financial Review (OFR)

Other matters

Other matters highlighted by ASIC include:

  • Off-balance sheet exposures (for example, has there been a change in circumstances such that an investment that was previously off-balance sheet is now controlled?).

  • Bed licences for aged care providers (i.e., consider the impact of the Government announcement in May 2021 that licences will be discontinued on 1 July 2024 and subsequent information from the Department of Health). • Insurers should disclose the impact of the new insurance accounting standard in the notes to the financial statements – given the application date of periods commencing 1 January 2023.

  • Private health insurers should consider the impacts on the deferred claims liability for changes in the backlog of delayed procedures. A liability may be required for a commitment to return premiums to existing policy holders for savings during the pandemic.

  • Disclosure of material penalties for non-compliance with sanctions imposed in Australia or elsewhere in relation to Russia.

More detail about ASIC’s focus areas for 31 December 2022 reporting: 22-333MR ASIC highlights focus areas for 31 December 2022 reporting | ASIC

The reporting process

Directors and auditors should apply appropriate experience and expertise in reporting and auditing, especially in complex areas such as asset values and estimates. Directors and auditors should have enough time to review reporting issues and question assumptions, estimates, and assessments. Proper documentation and disclosure should be done for the judgements made on accounting estimates and forward-looking information.

ASIC will continue to review the full-year financial reports of selected listed entities and other public interest entities as of 31 December 2022.

Discontinuation of extensions of time

ASIC has confirmed that there will not be a general extension of the December 2022 reporting deadline for unlisted entities as the impacts on audit firm resources have decreased, extensions can disrupt preparations for future audits, and there is a lower workload for audit firms during the December reporting season.

Audit focus areas

The focus areas outlined for financial reports are also key focus areas for auditors. Emphasis is placed on the importance of comprehensive business risk disclosure in annual reports.

ASIC emphasize that auditors need to bring in the understanding of a company's business, risks, and strategies that they have obtained through the financial report audit in reviewing the Operating and Financial Review (OFR). Although auditors do not provide an opinion on the OFR, they are required to examine it for any significant factual errors and inconsistencies with the financial report. Auditors need to document their evaluation of disclosures related to the causes of results, significant risks, strategies, and future prospects.


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