ASIC’s Focus Areas for 31 December 2024 Financial Report

Table of Contents 

1. Asset Values
   
   • Impairment of Non-Financial Assets
   • Values of Property Assets
   • Expected Credit Losses (ECLs)
   • Financial Asset Classification
   • Other Asset Considerations
2. Provisions
3. Subsequent Events
4. Disclosures
   
   • General Disclosure Considerations
   • Financial Report Disclosures
   • Operating and Financial Review (OFR)
   • Non-IFRS Financial Information
   • Half-Year Reporting
5. Preparing for Change
   
   • Additional Reporting Requirements
   • Navigate Financial Reporting Requirements with Automic Finance
   
   

Enduring Key Focus Areas 

ASIC has identified the following critical areas of focus for the upcoming reporting period: 

1. Asset Values 

Accurate asset valuation remains a cornerstone of reliable financial reporting. ASIC highlights several subcategories under this focus area: 

Impairment of Non-Financial Assets 

• Goodwill, indefinite useful life intangible assets, and intangible assets not yet available for use must undergo annual impairment testing. Entities impacted by adverse market conditions may need to conduct additional testing for other non-financial assets. 

• Key assumptions supporting recoverable amounts must be reasonable, supportable, and reflective of current conditions. These include cash flow forecasts, discount rates, and growth projections. 

• Market capitalisation, while not a direct measure of fair value, can serve as an impairment indicator or a cross-check for valuations. Care should be taken when using this method to account for market volatility, illiquidity, or strategic factors influencing share prices. 
  
  

Values of Property Assets 

• Factors such as changing tenant requirements, e-commerce trends, economic shifts, and tenant financial stability should be evaluated for potential impacts on property valuations. 

• Lease accounting and impairment of lessee right-of-use assets must be carefully reviewed to align with applicable standards. 
  
  

Expected Credit Losses (ECLs) 

• Key assumptions for ECLs on loans and receivables should be updated to reflect the financial condition, liquidity, and earning capacity of borrowers. 

• Forward-looking scenarios and probability-weighted assumptions must be used instead of relying solely on historical credit loss patterns. 

• Entities in the financial sector should ensure robust data modelling, controls, and governance when calculating ECLs. 
  
  

Financial Asset Classification 

• Financial assets must be appropriately classified into one of the following categories: amortised cost, fair value through other comprehensive income (FVOCI), or fair value through profit and loss (FVPL). 

• Criteria for using amortised cost include whether: 

• Assets are held in a business model whose objective is to collect contractual cash flows. 

• Contractual terms give rise to cash flows that are solely payments of principal and interest on the principal outstanding. 

• The classification must be revisited annually and adjusted when an entity's business model changes. 
  
  

Other Asset Considerations 

• Inventories: Ensure the net realisable value considers all costs necessary for completion and sale. 

• Deferred Tax Assets: Assess the probability of realisation based on expected future taxable income. 

• Investments in Unlisted Entities: Evaluate the reliability of valuation methods and assumptions. 

2. Provisions 

Adequate provisions must be recognised for obligations, including: 

• Onerous contracts. 

• Lease property make-good costs. 

• Environmental restoration and mine site rehabilitation. 

• Financial guarantees and restructuring costs. 

ASIC has encouraged accurate estimation and disclosure of uncertainties related to provisions. 

3. Subsequent Events 

Events occurring after the reporting date but before finalising financial statements must be carefully reviewed at the period end. These include: 

• Events that affect year-end assets, liabilities, income, or expenses. 

• Significant changes in market or operational conditions that may require disclosure. 

Consideration must be given to:

• Do these events provide evidence of conditions that existed at reporting date and for which need to be adjusted? 

• Do these events relate to conditions that arose after the reporting date, and if material, require disclosure? 
  
  

4. Disclosures 

Effective disclosures in financial reports and Operating and Financial Reviews (OFRs) are essential for investor confidence. 

General Disclosure Considerations 

• Disclosures should be entity-specific and provide meaningful insights into its financial position, performance, and risks. 

• Significant changes from prior periods must be highlighted. 
  
  

Financial Report Disclosures 

• Include key assumptions, estimation uncertainties, and sensitivity analyses to improve transparency. 

• Properly classify assets and liabilities as current or non-current, based on factors such as maturity dates and compliance with debt covenants. 
  
  

Operating and Financial Review (OFR) 

• The OFR should complement financial reports by narrating the entity's business performance, economic conditions, and future prospects. 

• Include material risks, such as environmental, social, and governance (ESG) concerns, cyber security vulnerabilities, and climate change impacts. 
  
  

Non-IFRS Financial Information 

• Non-IFRS profit measures must align with Regulatory Guide 230 to avoid misleading presentations. 
  
  

Half-Year Reporting 

• Half-year financial reports should disclose significant developments since the last full-year report, ensuring stakeholders remain informed of material changes. 
  
  

5. Preparing for Change 

ASIC’s focus areas underscore the increasing complexity of financial reporting. Entities should adopt proactive measures to address these requirements, such as robust internal controls, ongoing staff training, and early engagement with auditors. 

Additional Reporting Requirements 

• Consolidated entity disclosure statements for companies with December year-end must be lodged for the first time. 

• Sustainability and climate reporting obligations will commence for large entities from 1 January 2025, emphasising the need for immediate preparation. 
  
  

Navigate Financial Reporting Requirements with Automic Finance 

Financial reporting is becoming increasingly complex, and meeting regulatory expectations requires more than just compliance—it demands precision, transparency, and a forward-thinking approach.  

At Automic Finance, we specialise in addressing the nuanced requirements outlined by ASIC, offering tailored guidance to ensure your financial reports align seamlessly with current standards. Our team’s expertise goes beyond simply meeting obligations. We work closely with your business to enhance the quality and reliability of your reporting, helping you mitigate risks and build trust with stakeholders. 

Automic Finance provides flexible financial support tailored to your needs. We can act as your virtual CFO, partner with your existing CFO for expert advice, or supply a full finance team. From strategy and investor relations to accounting and compliance, we deliver the expertise and services to keep your finances on track. 

 
 
For more information, refer to ASIC’s official media release on focus areas for 31 December 2024 financial reports. 

To discuss how we can assist with your specific financial reporting needs, simply head to our new business enquiry page.