Directors trapped by ASIC focus

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ASIC has announced that it will be focusing on the content of the Operating and Financial Review (OFR) in the directors’ report this reporting season.

As a result it is crucial for firm directors to be on the front foot, according to RSM Bird Cameron.

James Komninos, managing partner – Perth, RSM Bird Cameron, said that while it is not a new requirement, there will be more scrutiny of the OFR.

The additional emphasis to be applied by ASIC adds to the already onerous regime surrounding the financial reporting responsibilities of a director. A failure to provide sufficient or necessary information in the OFR will potentially lead to some form of ASIC enquiry. Equally, any comment deemed to be misleading, regardless of intent, may also subject the board to ASIC scrutiny.

“Frequently, directors have used the OFR to promote future opportunities and amplify the positive aspects of the company’s outlook,” says Komninos. “Some may interpret this as putting a ‘spin’ on the future, however this commentary is supported by a comprehensive set of audited financial statements disclosing actual performance."

He believes it is a difficult balancing act in terms of the need to be precise – through well-defined financial information required by accounting standards – and the requirement to be exact in a comparatively non prescriptive OFR commentary.

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