Recurring financial reporting inadequacies

News release
22 June 2009

Commission alerts issuers to recurring financial reporting inadequacies

In its recent Cycle 9 review of financial statements the Securities Commission continued to find inadequacies in matters that were previously alerted to issuers. The Commission urges issuers to pay particular attention to these matters when preparing their upcoming interim and full-year financial statements.

These matters include:
• impairment of assets and the associated disclosures
• disclosure of significant assumptions relating to valuation of investment properties
• disclosures relating to financial instruments
• disclosure of significant judgments, key assumptions and major sources of estimation uncertainty

Other significant matters that require attention are:
• any change in or review of funding arrangements and the impact on classification of debt and the going concern assumption
• related party information, in particular, key management personnel compensation (including directors).

“The Commission understands the difficulties issuers face in reporting in the current market environment. It is more likely that issuers will have to review their assets for impairment and may face difficulties determining the underlying assumptions and estimates that are required to assess asset values. Transparent financial statements require disclosure of all significant assumptions, estimates and management judgements.” Commission Chairman Jane Diplock says. “Full disclosure is vital for market confidence.”

The Commission recently reviewed financial statements of 24 issuers with balance dates between March and December 2008. It is currently discussing its findings with issuers and will publish its conclusions in its Cycle 9 report.

ENDS

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