The ASIC media release on 6 June 2023 outlined its key areas of focus for this reporting season, stressing the need for directors, preparers of financial reports and auditors to evaluate the potential impact of shifting circumstances, uncertainties, and risks.

Key areas of focus

Asset values

Considerations for directors, preparers, and auditors regarding asset values include:

• impairment of non-financial assets
• appropriate valuation methods
• factors affecting property values
• expected credit losses
• asset classification
• inventory valuation
• deferred tax assets
• investments in unlisted entities.

Provisions

Financial statement preparers need to provide sufficiently for potential expenses or obligations relating to onerous or loss-making contracts, property leases, restoring mining or other sites, providing financial guarantees, and making changes to your business.

Solvency and going concern assessments

In a growing interest rate market, debt can become very expensive to manage and covenant breaches more common resulting in solvency and going concern issues. Inflation is also an issue for many entities to manage. Our advice is to ensure that projections are reasonable and realistic and going concern disclosures are made with sufficient detail in the financial statements if there are material uncertainties surrounding going concern.

Events occurring after year end and before completing the financial report

It is important to review any events that happen between the end of the year and the completion of the financial report. This review should determine if these events have any impact on the assets, liabilities, income, or expenses at the end of the year or if they involve new conditions that need to be disclosed. Covenant breaches post year-end need to be identified. Adjustments or disclosures relating to relevant events post-year end is important to investors and other stakeholders. Omission of such material information could be problematic, in particular in an uncertain economic environment.

Disclosures in the financial report and Operating and Financial Review (OFR)

Disclosure of information is important to investors and other stakeholders. Directors must ensure disclosures are specific to the entity’s circumstances and highlight changes from the previous period. Address uncertainties, classify assets and liabilities correctly, and explain the impact of economic conditions in the Operating and Financial Review. Discuss risks, strategies, and consider climate change and cybersecurity risks. Present non-IFRS profit measures accurately and disclose significant developments since end of last year in half-year reports.

Impact of uncertainty

Market and economic conditions are particularly uncertain this year, which impacts financial reporting in areas where significant estimates and judgements are required in the financial statements.

The impact will be different depending on industry, geography, markets, suppliers and customers but very few industries are not facing significant uncertainty.

Directors and financial statement preparers should take into account what the entity’s current performance is, what the future holds and how those factors impact on values of assets, provisions and business strategies.

“We have seen ASIC take more action against Directors in recent times and recommend that Directors are across all the significant estimates and judgements in their financial reports, including ensuring material disclosures are appropriate, complete and accurate. In an uncertain economic environment, more estimates and judgements are required in financial reporting particularly when incorporating forward-looking information,”

Rene Muller, Partner SW Assurance and Advisory Division

The particular market conditions highlighted by ASIC as those representing changing circumstances, uncertainties and risks are:

• availability of skilled staff and expertise, which can impact on revenue and costs
• impact of rising interest rates on future cash flows and on discount rates used in valuing assets and liabilities
• inflationary impacts that may differ between costs and income
• increases in energy and oil prices
• geopolitical risks, including the Ukraine/Russia conflict
• impacts of climate change, climate related events and transitioning to ‘net zero’
• technological changes and innovation
• COVID-19 conditions and restrictions during the reporting period
• changes in customer preferences and online purchasing trends
• discontinuation of financial and other support from governments, lenders and lessors
• legislative and regulatory changes
• other economic and market developments.

How SW can help

Our team of audit and assurance experts are fully informed of the ASIC focus areas and can assist with providing guidance for your year-end financial reporting, as well as keeping you abreast of developments from an Australian reporting context.

Reach out to our key contacts here for a conversation.

Key contacts

Jimmy Cao

The post ASIC focus areas for 30 June 2023 reporting appeared first on SW Accountants & Advisors.

On 1 July 2021 wage theft became a crime in Victoria.

The Wage Theft Bill 2020 creates new employee entitlement offences, comprising wage theft offences and new record keeping offences. It is designed to capture employers who falsify or fail to keep records for the purposes of concealing wage theft.

The key objective of the Bill is to ensure that employers who withhold employee entitlements dishonestly are held to account and protect vulnerable employees from exploitation.

The new law states that employers who dishonestly withhold wages, superannuation or other employee entitlements could be fined up to $198,264 for individuals, $991,320 for companies and be sentenced to up to 10 years’ jail.

As a director, you have a legal responsibility to ensure your company meets its Pay As You Go (PAYG) withholding and Superannuation Guarantee Charge (SGC) obligations. If the company does not meet these obligations, you may become personally liable for a penalty equal to these amounts.

Payroll health check

In light of these new laws and given the number of organisations that have been publicly identified to have underpaid employees we urge all businesses to undertake a payroll health check. The health check will ensure that all entitlements, including superannuation, are accurately determined and paid in compliance with the current ATO requirements to avoid any penalties.

• Underpayments to casual and permanent staff for ordinary pay, overtime and leave loading
• Inconsistencies and incorrect interpretation and payment of payroll entitlements under various Awards
• Underpayment of Superannuation entitlements.

What is the impact?

Financial risks

• Underpayment to employees
• Payroll tax underpayment
• Superannuation underpayment
• WorkCover underpayment
• Annual leave loading underpayment
• Penalties arising from underpayments

Reputation risks

• Staff morale
• Community expectations
• Adverse media attention
• Criminal prosecution

Opportunity

• Self report to avoid potential financial and/or criminal actions
• Meet your social and legal obligations to act in the best interests of your employees
• Be able to potentially claim a corporate tax deduction for the payment of underpaid superannuation
• Receive a reduction of potential penalties that can be up to 200% of the total underpaid superannuation.

Get in touch

Through the use of sophisticated data analytics and a review of your current awards, enterprise agreements and payroll processes, SW can assist you to manage your organisation’s payroll and superannuation risks efficiently, as well as identifying potential savings opportunities.

We use our customised data analytics tool to review your payroll records to identify any shortfalls or disclosure concerns.

Rest assured that whilst the Government’s social distancing guidelines are in force, we are able to assist you remotely during this period and are able to provide the full benefits of these services.

Reach out to one of our SW experts below to discuss how we can support you.

 Contacts

The post Wage theft criminalised in Victoria appeared first on SW Accountants & Advisors.