ASIC notes the decisions by the following companies:
- Nitro Software Limited – The decision to reduce both its contract assets and deferred revenue balances relating to client software subscriptions by $14.7 million in its financial report for the half-year ended 30 June 2020. ASIC had raised concerns on the recognition of the equal and offsetting contract assets and deferred revenue from the inception of multi-year subscription contracts at 31 December 2019.
- Kresta Holdings Limited – The decision to reduce the gain recognised on a sale and leaseback transaction by $997,000 in its financial report for the half-year ended 30 June 2020. ASIC had raised concerns on the amount of the gain on the sale and leaseback of a property under a new standard on lease accounting in the financial report for the year ended 31 December 2019.
- Elixinol Global Limited – The decision to impair goodwill, inventories and other assets by $60 million in its financial report for the half-year ended 30 June 2020. ASIC had raised concerns about the reasonableness and supportability of free cash flow forecasts used in assessing goodwill for impairment at 31 December 2019 having regard to historical performance and market conditions.
- LawFinance Limited – The decisions to reclassify $41.6 million of liabilities from non-current to current and to restate comparative information to recognise $19.6 million of fair value gains on liabilities in the following period in its financial report for the half-year ended 30 June 2020. ASIC had raised concerns on the classification of liabilities and recognition of fair value gains on liabilities in the financial report for the year ended 31 December 2019.
As outlined in ASIC media release 20-157MR Focuses for financial reporting under COVID-19 conditions, asset values and lease accounting are focus areas for financial reporting at 30 June 2020. Where asset impairment or reduced performance is attributable in whole or part to significant factors not related to the COVID-19 pandemic, these factors should be disclosed and given appropriate prominence in addition to any significant COVID-19 factors. The focus areas also include liabilities and the current/non-current classification of liabilities.
Directors are primarily responsible for the quality of an entity’s financial report. This includes ensuring that management produces quality financial information on a timely basis. Companies must have appropriate processes, records and analysis to support information in the financial report.
Companies should apply appropriate experience and expertise, particularly in more difficult and complex areas of accounting policies and estimates.