ASIC Surveillance Large Proprietary Companies

As part of their review of financial statements for the years ended 30 June 2012 and 31 December 2012 ASIC reviewed the financial reports of approximately 200 large proprietary companies assessing the compliance of these entities with the financial reporting requirements of the Corporations Act 2001.

The key findings of ASIC’s review highlighted the propensity of a significant majority of the companies subject to review deeming themselves to be non-reporting entities and therefore prepare special purpose financial statements, despite the existence of significant employees, creditors and customers.

In preparing special purpose financial statements, ASIC further noted instances of non-compliance with the recognition and measurement requirements of certain accounting standards, in particular impairment of goodwill and other non-current assets.  Such non-compliance opposes ASIC Regulatory Guide RG 85 ‘Reporting requirements for non-reporting entities’ which requires non-reporting entities to comply with the recognition and measurement requirements of all relevant accounting standards.

In preparing special purpose financial statements, ASIC further noted instances of non-compliance with the recognition and measurement requirements of certain accounting standards, in particular impairment of goodwill and other non-current assets.  Such non-compliance opposes ASIC Regulatory Guide RG 85 ‘Reporting requirements for non-reporting entities’ which requires non-reporting entities to comply with the recognition and measurement requirements of all relevant accounting standards.

Other matters identified in ASIC’s reviews included:

  • The absence of appropriate going concern disclosures where the entity has a history of losses, has operating cash outflows and is reliant on another party for ongoing financial support;
  • Insufficient entity specific accounting policies, including revenue recognition, joint venture arrangements and the valuation basis for non-current assets
  • Instances where entities were relying on ASIC’s Class Order 98/1417 for relief from the audit requirements of the Corporations Act, even though they did not meet the financial or other conditions of the class order.

The review also highlighted consistent late lodgement of financial statements.

For more information on ASIC’s areas of focus or for assistance with preparing your financial reports, please contact your local William Buck advisor.