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Responsibility yours, ASIC warns directors

by: James Frost
From:The Australian
December 22, 201112:00AM

RESULTS: The Australian Securities & Investments Commission has put company directors and chief financial officers on notice by revealing its priorities for the upcoming financial reporting season.

The early warning from the regulator follows a Federal Court ruling that leaves no doubt as to who is responsible.

ASIC yesterday said it would pay particular attention to asset values, going concern assessments, material assumptions, off balance sheet arrangements and segment reporting in statements for the half year to December 31.

"Confidence in the quality of financial reporting is fundamental for investors, lenders and also market regulators," ASIC deputy chairman Belinda Gibson said.

"While the overall quality of financial reporting in Australia compares favourably with other major jurisdictions, we continue to find a number of cases where adjustments are required."
Front of mind for many directors will be the question of liability after a Federal Court found in ASIC's favour, ruling the directors of failed property group Centro did not exercise due care and diligence when they signed off on financial reports that erroneously classified $1.5 billion of debt as non-current.

Company directors will need to scrutinise asset values carefully this year, with ASIC highlighting the potential for exposure to overseas markets, exchange rates, the carbon tax and the minerals resource rent tax to have a considerable impact on fair value.

It singled out the treatment of goodwill and identifiable intangibles in financial reports as being in need of improvement.

The regulator also drew attention to examples where reported net assets were significantly higher than the company's market capitalisation, expressing concern that some companies are ignoring the significance of the situation.

Directors are urged to keep a close eye on commonly used terms such as underlying profit, normalised profit and profit before significant items, as part of the broader crackdown.

The terms are not consistent with International Financial Reporting Standards in ASIC's view, and therefore could be seen as misleading.
http://www.theaustralian.com.au/business/companies/responsibility-yours-asic-warns-directors/story-fn91v9q3-1226227964125