ASIC reporting guidance: businesses must ‘tell the story’

By John Hutchinson, James Morvell, Vanessa Murphy and Ben McIver

ASIC has released information about its focus areas for financial reporting in the COVID-19 environment for the year ending 30 June 2020. Our Corporate and Commercial team provides a rundown of what reporting entities need to know about the new information, which ASIC released on 7 July 2020.

Unsurprisingly, ASIC has confirmed that the quality of financial reports and disclosures is more important than ever during the current COVID-19 pandemic. The guidance provides that entities should take a cautious approach when reporting the impact of the COVID-19 crisis. ASIC says entities should ensure that steps taken as part of the reporting process are carefully considered by those with the appropriate experience and expertise.

ASIC has highlighted the importance of entities providing useful and meaningful disclosure that addresses both the business impacts and potential uncertainties. The financial report and Operating and Financial Review (OFR) should ‘tell the story’ of how the entity’s businesses have been impacted by COVID-19.

The content requirements relating to financial reports themselves are not changing. Instead, this regulatory guidance serves as a reminder that different external influences may be of particular relevance to reporting entities as they face the ‘new normal’.

The following focus areas have been specifically called out, suggesting that there will be increased regulatory scrutiny of these matters:

  • Factors affecting asset values, provisions and assessments of solvency and going concern. These include (among others) economic and industry-specific factors, and management plans and response to COVID-19 impacts.
  • Asset values – including the impairment of non-financial assets (such as goodwill, indefinite useful life intangible assets and intangible assets not yet available for use), the value of commercial and residential property assets, expected credit losses on loans and receivables, and the values of other assets (such as the impact that COVID-19 has had on the value of investments in unlisted entities).
  • Provisions – such as for onerous contracts, financial guarantees given and restructuring.
  • Subsequent events occurring after year-end but before the completion of the financial reports that affect assets, liabilities, income or expenses at year-end or relate to new conditions requiring disclosure (for example, receipts after year-end, which affect recoverability of loans/receivables).
  • Disclosures in the financial report and OFR, which should be specific to the entity’s circumstances. ASIC has provided specific guidance in relation to matters that should be included in the financial report, OFR and half-year reports. For example, that half-year reports may need to include a level of disclosure similar to that required in full-year reports about the impact of COVID-19 pandemic.
  • Reporting processes – including the proper documentation and disclosure of judgements on accounting estimates and forward-looking information, each of which should have a reasonable basis and be communicated to the market through continuous disclosure.
  • Other matters such as hedge effectiveness, sales returns, and off-balance sheet exposures.


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