Crisis pushes accounting standards

An Australian Securities and Investments Commission (ASIC) analysis of accounting practices within about 350 Australian companies suggests the financial crisis has prompted some directors to adopt inappropriate strategies.

The questionable strategies have been revealed by the regulator in a report released today in which it said the appropriateness of so-called “going concern” assumptions continued to be an issue together with what it described as “unrealistically optimistic discount and growth rates” and cash flow projection over as much as five years.

Commenting on the review findings, ASIC commissioner Michael Dwyer said it highlighted a number of areas where companies and their auditors needed to pay greater attention.

He said the findings had prompted ASIC to make contact with a number of entities “to better understand their accounting treatments” and to seek further explanation of some matters.

Dwyer said ASIC would be conducting follow-up reviews to ensure the issues had been appropriately addressed.

“The global financial crisis has affected Australian entities in different ways,” he said. “Despite signs of improvement in the Australian economy, we encourage companies and their auditors to continue to focus on issues such as going concern, asset impairment and fair value determination.”