ASIC fears companies are not prepared for financial reporting changes

The Australian Securities and Investments Commission (ASIC) has called on companies to focus on new requirements that can materially affect reported assets, liabilities and profits.

Major new accounting standards will have the greatest impact on financial reporting for many companies since the adoption of International Financial Reporting Standards (IFRS) in 2005, ASIC warned on Monday.

ASIC will be reviewing more than 85 full-year financial reports at 31 December 2018 and selected half-year reports.

Both full-year and half-year reports must comply with new accounting standards on revenue recognition and financial instrument values. They must also disclose the future impact of new lease accounting requirements, ASIC said.

“We are concerned that some companies may not have adequately prepared for the impact of new accounting standards that can significantly affect results reported to the market by companies, require changes to systems and processes, and affect businesses. We will monitor these areas closely and will take action where required,” ASIC commissioner John Price said.

There are also new standards covering accounting by insurers and the definition and recognition criteria for assets, liabilities, income and expenses.

ASIC cautioned that directors and management should ensure that companies are prepared for these new standards and inform investors and other financial report users of the impact on reported results.

It also advised companies to apply appropriate experience and expertise, particularly in more difficult and complex areas such as accounting estimates (including impairment of non-financial assets), accounting policies (such as revenue recognition) and taxation.