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Continuing impact of COVID-1931 December 2020 surveillance | Quality of disclosures | Focus areasDownload the report | Find out more


ASIC has released its areas of focus for 30 June 2021 reporting which are largely consistent with those communicated for 31 December 2020. It has also announced the results of its review of financial reports for 31 December 2020. All preparers (listed and unlisted) should ensure all relevant aspects are addressed.

Continuing impact of COVID-19

ASIC continues to highlight the importance of communicating the impacts of evolving COVID-19 conditions to the market.

ASIC’s frequently asked questions (FAQs) on the impact of COVID-19 on financial reports and audits provide further guidance on considering the evolving impacts of the pandemic. These ASIC FAQs are updated, as needed, in response to emerging issues and changing circumstances.

The first of the FAQs addresses ASIC’s focus areas for companies, directors and auditors for financial reporting given the impact of the COVID-19 pandemic. ASIC’s focus areas for 30 June 2021 reporting are consistent with those areas listed in that FAQ. ASIC has further expanded the FAQs to address other topical issues companies, directors and auditors should focus on beyond the impact of COIVD-19, including cloud computing arrangements and liabilities for entitlements of casual employees.

ASIC has advised its surveillance of financial reports for the 30 June 2021 reporting season will focus on entities and industries more affected by the current conditions. The reviews will be of financial reports of selected larger listed entities and other public interest entities.

Continuing impact of COVID-19

31 December 2020 surveillance

ASIC also recently announced the results from its review of 31 December 2020 financial reports. While it was noted that many companies have continued to make useful and meaningful disclosures on the impact of COVID-19 conditions, there were some notable exceptions.

ASIC made 22 inquiries of 15 entities relating to matters set out below. Once again impairment and other asset values were a key focus, particularly given the extended impacts of COVID-19, attracting close to half the number of inquiries.

Matter Inquiries
Impairment and other assets 10
Operating and financial review 3
Consolidation accounting 2
Lease accounting 2
Off-balance sheet arrangements 1
Revenue recognition 1
Provisions 1
Other matters 2

The nature of inquiries related to impairment and asset values were largely similar to those from review of 30 June 2020 financial reports and centred on the reasonableness of cash flows and assumptions used in determining recoverable amounts. From a disclosure perspective, inquiries focused on disclosure of the key assumptions, including discount rates, and growth rates and for fair values, the valuation techniques and inputs used.

The continued focus on the quality of an entity’s Operating and Financial Review (OFR) and extent to which it complemented the financial report and told the story of how COVID-19 impacted the entity’s business is borne out by the number of inquiries made relating to the OFR.

“Given the continuing impacts of the COVID-19, there is heightened focus on how entities have addressed the potential uncertainties in their impairment modelling. It is important that key assumptions, such as discount rates and growth rates, are reasonable and supportable having regard to matters such as historical cash flows, economic and market conditions, and uncertainties due to COVID-19 conditions.

In addition, entities should make necessary disclosures of sensitivity analysis where headroom between recoverable amount and carrying amount is low and a reasonably possible change in one or more assumptions could lead to impairment.”

Michael Voogt
Department of Professional Practice

Quality of disclosures

Fresh off the back of ASIC’s 31 December 2020 financial report surveillance, it continues to emphasise how critical the quality of financial reports and related disclosures are for keeping investors informed.

For a June year end, disclosing the continuing impact of evolving COVID-19 conditions so that users of financial statements can clearly understand how the entity’s business has been impacted, the risks faced, management strategies employed and the future prospects will require careful explanation. ASIC also reminded directors to include a discussion of climate-related risk in the OFR when it could have a material impact on the company’s financial performance.

Entities preparing half-year reports will equally face the disclosure challenges. The continuing impacts of COVID-19 conditions will likely require more disclosure in the half-year financial reports to adequately communicate the changing uncertainties from the last annual report at 31 December.

30 June 2021 focus areas

The areas of focus identified by ASIC are broad, with the five major themes being:

  • asset values
  • provisions
  • solvency and going concern assessments
  • events occurring after the reporting date
  • disclosures (in the financial report and the OFR).

Further discussion on each of these areas, including guidance for preparers to consider in addressing the focus areas, can be found in the PDF version of the Reporting Update.

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Understand more about ASIC’s 30 June 2021 focus areas that centre on the continuing impacts of COVID-19.

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