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Australian Regulator Flags Important Accounting Standard Changes

by Mary Swire,, Hong Kong

07 December 2018

The Australian Securities and Investments Commission (ASIC) has highlighted the significant impact that recent accounting standard changes will have for financial reports that must be prepared for the year to December 31, 2018, and second quarter reports.

Both full-year and half-year reports must comply with new accounting standards on revenue recognition and financial instrument values (including hedge accounting and loan loss provisioning). These can materially affect reported assets, liabilities, and profits, ASIC said.

The reports must also disclose the future impact of new lease accounting requirements. There are also new standards covering accounting by insurers and the definition and recognition criteria for assets, liabilities, income, and expenses.

In a December 3, 2018, release, ASIC Commissioner John Price 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.'

The Commission said it is important that directors and management ensure that companies are prepared for these new standards and inform investors and other financial report users of the impact on reported results.

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

The Commission noted that directors are primarily responsible for the quality of the company's financial reports. This includes ensuring that management produces quality financial information on a timely basis. It highlighted that companies must have appropriate processes, records, and analysis to support information in the financial report.

It instructed 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."

ASIC pointed out that extra information can be found in ASIC Information Sheet 183 Directors and financial reporting, and ASIC Information Sheet 203 Impairment of non-financial assets: Materials for directors.

TAGS: tax | business | interest | accounting | Australia | financial reporting | standards | Investment | Invest | Other | Investment

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