Reporting focuses at 30 June 2012

Performance and uncertain economic conditions

1. Revenue recognition, expense deferral and other comprehensive income

Directors and auditors should review revenue recognition policies to ensure that revenue is recognised in accordance with the substance of the underlying transaction. Services must have been performed and control of goods passed to the purchaser.

Expenses should only be deferred where there is an asset with resources controlled by the entity as a result of past events from which economic benefits are expected to flow to the entity. The requirements of the intangibles accounting standard must be met, including expensing start-up, training, relocation and research costs.

2. Asset values

Directors should carefully consider asset values and the appropriateness of underlying assumptions, particularly in the context of current economic conditions. Disclosure of the key assumptions and associated sensitivity analysis enables users of the financial report to make their own assessments about the carrying values of the entity’s assets given the subjective nature of many asset valuations.

Entities impacted by the introduction of the carbon tax and mining resource rent tax (MRRT) will need to take this into account when performing their impairment testing of non-current assets. For the MRRT, affected entities will need to obtain asset valuations if they adopt the market approach to the starting base allowance and ensure they correctly account for any impact on deferred tax balances.

 3. Off-balance sheet arrangements

Directors should carefully review the treatment of off-balance sheet arrangements, particularly where the entity has the right to obtain the majority of the benefits of any special purpose entity’s activities or any assets transferred to another entity, and is exposed to the majority of risks.

Where arrangements remain off balance sheet, the details of the arrangements and any exposures should be disclosed, together with the reasons why they are not on balance sheet.

 4. Going concern

Directors need to be realistic in their assumptions about an entity’s future prospects. Where an entity is assessed to be a going concern, but significant uncertainty exists, the entity must ensure that its financial report adequately discloses the uncertainty and why the directors consider the entity to be a going concern. Directors should continue to review ability to refinance maturing debt and compliance with loan covenants.

Information for investors

5. Non-IFRS financial information disclosures

Directors continue to review non-IFRS financial information disclosures against ASIC Regulatory Guide RG 230 Disclosing non-IFRS financial information.

6. Operating and financial review (OFR)

Directors should ensure that the OFR provides useful and meaningful information, including analysis and explanation of the underlying drivers of the material components of the result.

7. Current vs non-current

Directors should focus on the classification of the entity’s assets and liabilities between current and non-current. They should ensure that appropriate systems are in place, have regard to loan maturities and lending covenant breaches, and ensure that the classification is consistent with accounting standards and their understanding of the business.

8. Estimates and accounting policy judgements

Disclosures in this area are important to allow users of the financial report to assess the reported financial position and performance of an entity with all relevant and necessary information. Directors should review the disclosures to ensure they are specific to the assets, liabilities, income and expenses of the entity.

9. Financial instruments

Risks associated with financial instruments should be disclosed, together with how those risks are managed. Other disclosures include an ageing analysis of financial assets that are past due but not impaired and/or an analysis of impaired financial assets, and methods and significant assumptions used to value financial assets for which there was no observable market data.

10. New accounting standards

New accounting standards on consolidations, joint ventures and interests in other entities apply for periods beginning on or after

1 January 2013. The balance sheet at 30 June 2012 will form the opening balances of the first comparative period to which these standards will apply. The impact of the standards is required to be disclosed at 30 June 2012.