Prior to the end of each financial year, ASIC releases guidance to publicly listed companies (and other reporting entities) on its “focus areas” for financial reports. ASIC has recently released its guidance for FY18: FY18 financial reports – ASIC focus areas
Impact of new accounting standards
A number of new accounting standards have been released which will materially affect the preparation of FY18 financial report, including standards which vary:
Directors are primarily responsible for ensuring that these new accounting standards are appropriately applied. Given the wide-ranging and material nature of the changes to the standards, we recommend that directors and management (who have not already started to do so) immediately commence assessing the impact of these changes.
In particular, the changes to the revenue recognition could have significant impact on the timing and amount of revenue recognised under existing contracts for future deliverables. Substantial resources, time and effort may need to be devoted to working through how these changes impact your FY18 financial reporting.
ASIC has also reminded directors and preparers of financial reports that the recoverable amounts of non-tangible assets (e.g. goodwill) as well as tangible assets (like plant and equipment) continue to be a focus. Directors and auditors should ensure that assumptions are reasonable having regard to historical cash flows, market conditions and funding costs.
Accounting policy choices
In relation to the following areas of accounting policy choices, ASIC has provided the following guidance:
Reminders were also made in relation to full and appropriate disclosures where estimations are subject to uncertainty or if the application of accounting policies is subject to significant judgment.