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2018 FINANCIAL STATEMENT PREPARATION

It’s that time of the year again when businesses are gearing up for the financial year end and getting ready to prepare the 2018 Financial Statements.

Directors have a number of obligations and considerations in regard to their duties and financial reporting. A summary of guides and focus areas of ASIC in regard to financial reporting is listed below to keep in mind or flag to discuss with your accountant.

DIRECTORS DUTIES

Directors have numerous obligations and INFO SHEET 183 explains your financial reporting responsibilities as a director which includes:

  • You must keep adequate financial records to correctly record and explain transactions and the company’s financial position and performance;
  • Must not trade whilst insolvent; and
  • General duties including the duty to act in good faith, exercise your powers and duties with care and diligence and duty to not improperly use information or your position to gain an advantage.

Are you tax time ready?

IMPAIRMENT TESTING AND ASSET VALUES
  • The recoverability of the carrying amounts of assets such as goodwill, other intangibles and property, plant and equipment continues to be an important area of focus.


    See INFO SHEET 203 for more information.

TOP 3 INSOLVENCY INDICATORS

ASIC issue quarterly and annual data on insolvent companies. The top 3 indicators have consistently shown to be:

  1. Non-payment of statutory debts (eg PAYGW, SGC, GST);
  2. Difficulties paying debts when they fall due (eg evidenced by letters of demand, recovery proceedings, increasing age of accounts payable);
  3. Financial statement that disclose a history of serious shortage of working capital and unprofitable trading.

For the last annual report click below.

Report 558.

Be 2018 Financial Statement ready

PROPRIETARY COMPANIES

  • ASIC continues to review the financial reports of proprietary companies and unlisted public companies, based on complaints and other intelligence.
  • ASIC wrote to more than 1,000 proprietary companies that appeared to be large with no reporting exemption and had not lodged financial reports. ASIC advise they will be writing to several hundred more companies later this year.
  • What is large v small proprietary company? See here for the test.

NEW ACCOUNTING STANDARDS

New accounting standards may significantly affect reported results of many companies including:

  • AASB 9 Financial Instruments (applies from years commencing 1 January 2018);
  • AASB 15 Revenue from Contracts with Customers (applies from years commencing 1 January 2018);
  • AASB 16 Leases (applies from years commencing 1 January 2019);
  • AASB 17 Insurance Contracts (applies from years commencing 1 January 2021); and
  • Amendments to standards to apply the new definition and recognition criteria in the Conceptual Framework for Financial Reporting (applies from years commencing 1 January 2020).

In addition to the impact on reporting for the periods in which the standards first apply, there is a requirement to disclose the impact of the standards in notes to financial reports ahead of the operative dates for the new standards.

FINANCIAL REPORTING QUIZ FOR DIRECTORS

Not sure about your financial reporting knowledge? ASIC have a financial reporting quiz to help test your knowledge. Take the reporting quiz for Directors here.

Want to know more?

Contact Naomi Menon – Head of Compliance and Operations, AFTA at naomi@afta.com.au.