ASIC focus areas and restatements for 31 December 2018

The ASIC focus areas for December 2018 have just been released. There are no significant changes to the areas highlighted in June, which were:

ASIC focus areas

Impact of the new standards
Impairment testing and asset values
Revenue recognition
Expense deferral
Off balance sheet arrangements
Tax accounting
Estimates and accounting policy judgements.

In addition, ASIC have encouraged entities to improve their disclosures in relation to estimates and accounting policy judgements as well as the impact of the new revenue, financial instrument, lease and insurance standards.

Since May 2017, the following entities have seen changes to their financial statements as a result of ASIC enquiries, the total profit adjustments were more than $750m.

ASIC restatements

The following entities have made changes to their financial statements following ASIC enquiries.

Restatements

Pacific Current

ASIC raised concerns with the non-consolidation of Aurora Trust (Aurora) when Pacific Current had rights to variable returns of Aurora and had the ability to use its power to affect the relevant activities and returns of Aurora.
Consolidated reduced net assets by $48.3 million at 30 June 2017 and profit after tax by $65.8 million for the year ended 30 June 2017.

Myer Ltd

Write down goodwill and brand name intangibles by $515m in half year financials
ASIC raised concerns over reasonableness and supportability of the cash flow forecasts used in testing the assets for impairment.

Orica Limited

Increase to environmental provision by $115m
ASIC concerns – re: adequacy having regard to likely duration and cost of remediation obligations at Botany Industrial Park site

Kazakhstan Potash

De-recognised existing convertible notes and issue of new notes Initially $8.6m profit on issue
ASIC raised concerns and reduction of profit of $8m

Premier Investments

Write down of casual wear brand name assets by $30 million
ASIC had concerns on the value of these assets in relation to the reasonableness and supportability of royalty rate assumptions and sales growth forecasts used in testing the assets for impairment.
Premier has referred to the increasingly competitive retail landscape and structural changes impacting the apparel industry in Australia and New Zealand.

We encourage entities to review the relevant media releases for ASIC’s focus areas as referenced in the table to ensure that where a topic is relevant, those charged with governance understand ASIC’s position.

Further information on any of these restatements can be obtained from your Bentleys advisor.