The corporate regulator has issued a warning to both listed and unlisted companies on creative and inadequate financial reports in the lead up to the reporting season.
The Australian Securities and Investments Commission (ASIC) said it intends to review the financial reports of 350 entities “identified for scrutiny”, including 250 listed companies and 100 unlisted companies with large numbers of users.
ASIC Commissioner Michael Dwyer said the regulator continues to focus on issues such as going concern assumptions, asset impairment and fair value determination, among other issues. Dwyer said the regulator was also focusing on how companies report their performance, including the use of non-statutory profit measures.
Continuing tight credit conditions for some companies makes the calculation of going concern assumptions particularly important. Companies should continue to focus on their ability to refinance debt within the next 12 months as well as compliance with lending covenants.
The recording of asset impairment and fair value of assets are also high on the regulator’s agenda, as is the disclosure of risks arising from the use of financial instruments.
Meanwhile, a review of 50 profit announcements of listed entities undertaken by ASIC found 78 per cent disclosed an alternative profit measure.
“The financial report should not include alternative profit measures,” the regulator warned.
Furthermore, non-statutory profit measures should not be presented in a misleading manner or detract from disclosure of statutory profit.
