ASIC 2026-27 Financial Reporting Focus Areas: Impairment, Revenue, and ECL in Australia

Each year, the Australian Securities and Investments Commission (ASIC) publishes its financial reporting and audit focus areas — a roadmap of the judgement-intensive accounting issues it will scrutinise in its surveillance program. For the 2026-27 financial year, ASIC has identified asset impairment, revenue recognition, expected credit losses, and provisions as its primary areas of concern. Australian businesses and their boards need to understand these priorities before engaging an auditor, because ASIC's focus areas directly shape the questions auditors will ask and the evidence they will require.

Why ASIC's Annual Focus Areas Matter

ASIC's financial reporting surveillance program reviews the financial reports of listed entities, large proprietary companies, and other reporting entities to assess compliance with Australian Accounting Standards. When ASIC identifies a concern, it can require entities to restate financial reports, issue infringement notices, or commence civil penalty proceedings.

For 2026-27, ASIC has announced it will review 25 audit files across a range of entity types, including files identified as having a risk of material misstatement and those flagged through independence monitoring. ASIC is also engaging directly with the six largest audit firms to review their firm-wide responses to independence and conflict-of-interest obligations.

Understanding ASIC's focus areas helps Australian businesses prepare more robust financial reports, engage auditors who are equipped to address these specific risks, and avoid the reputational and financial consequences of ASIC intervention.

Asset Impairment and Valuation

Impairment testing remains one of ASIC's most consistent areas of concern, and 2026-27 is no exception. ASIC requires entities to conduct annual impairment testing for goodwill, indefinite-life intangible assets, and assets not yet available for use — regardless of whether there are obvious indicators of impairment.

Key Issues ASIC Is Watching

• Assumptions and discount rates — ASIC has repeatedly found that entities use overly optimistic cash flow projections and discount rates that do not reflect current market conditions. Auditors must challenge management's assumptions and require independent support for key inputs.
• Market capitalisation as a cross-check — ASIC emphasises that market capitalisation should generally serve only as an impairment indicator or valuation cross-check, not as a definitive fair value. Entities whose carrying value exceeds market cap face heightened scrutiny.
• Property asset valuations — For commercial and retail property assets, ASIC expects directors to consider modern structural factors including hybrid work trends reducing office demand, the impact of online retail on physical retail valuations, and the financial health of tenants. Valuations that ignore these factors are likely to attract ASIC attention.
• Entity-specific disclosures — Generic or boilerplate impairment disclosures are a red flag for ASIC. Entities must provide entity-specific information about the assumptions used, the sensitivity of the impairment assessment to changes in those assumptions, and the potential range of outcomes.

Revenue Recognition

Revenue recognition under AASB 15 Revenue from Contracts with Customers continues to be an area where ASIC finds material errors and inadequate disclosures. The standard requires entities to recognise revenue in a way that reflects the transfer of promised goods or services to customers, based on the satisfaction of performance obligations.

ASIC's 2026-27 focus is on ensuring that revenue recognition reflects the substance of transactions rather than their legal form. Common issues include premature revenue recognition before performance obligations are satisfied, incorrect treatment of variable consideration (such as rebates, discounts, and returns), and inadequate disclosure of the judgements made in applying the standard.

For Australian businesses with complex revenue arrangements — including long-term contracts, multi-element arrangements, and subscription models — auditors will be expected to obtain sufficient evidence that revenue has been recognised in the correct period and amount. Entities should ensure their revenue recognition policies are documented, consistently applied, and clearly disclosed in the financial report.

Expected Credit Losses

The expected credit loss (ECL) model under AASB 9 Financial Instruments requires entities to recognise credit losses based on forward-looking information, not just historical loss experience. For 2026-27, ASIC is focusing on whether entities — particularly financial institutions and businesses with significant trade receivables — are applying the ECL model correctly.

What ASIC Is Looking For

• Forward-looking data — ECL calculations must incorporate forward-looking macroeconomic information, not just historical default rates. In the current environment of elevated interest rates and cost-of-living pressures, entities must consider how these factors affect the credit risk of their counterparties.
• Governance and data controls — For financial institutions, ASIC specifically notes that the adequacy of ECL modelling, governance frameworks, and data controls will be reviewed. Auditors must assess whether the entity's ECL model is fit for purpose and whether the inputs are reliable.
• Staging assessments — AASB 9 requires entities to assess whether financial assets have experienced a significant increase in credit risk since initial recognition. ASIC has found that some entities apply staging criteria mechanically without genuine assessment of the underlying credit risk.
• Sensitivity disclosures — Entities must disclose the sensitivity of their ECL estimates to changes in key assumptions. ASIC expects these disclosures to be quantitative and entity-specific, not generic statements about uncertainty.

Provisions: Decommissioning and Site Restoration

ASIC has flagged provisions for decommissioning and site restoration as a specific focus area for 2026-27, following the release of new guidance in Illustrative Example D of AASB 137 Provisions, Contingent Liabilities and Contingent Assets. This is particularly relevant for entities in the resources, energy, and infrastructure sectors.

The new guidance clarifies how entities should measure decommissioning provisions, including the treatment of future cost escalation, the appropriate discount rate, and the recognition of changes in estimates. ASIC will benchmark entity disclosures against this guidance and is likely to challenge provisions that appear understated relative to the entity's actual decommissioning obligations.

For businesses outside the resources sector, ASIC's broader focus on provisions extends to lease make-good obligations, restructuring provisions, and warranty provisions. Auditors will be expected to assess whether provisions are recognised at the best estimate of the expenditure required to settle the obligation, with adequate disclosure of the key assumptions and uncertainties.

Australian Regulatory Context

ASIC's financial reporting surveillance program operates under the Corporations Act 2001, which requires reporting entities to prepare financial reports that comply with Australian Accounting Standards and give a true and fair view of the entity's financial position and performance.

The Australian Accounting Standards Board (AASB) sets the accounting standards that underpin ASIC's focus areas. For 2026-27, the relevant standards include AASB 136 Impairment of Assets, AASB 15 Revenue from Contracts with Customers, AASB 9 Financial Instruments, and AASB 137 Provisions, Contingent Liabilities and Contingent Assets.

The Auditing and Assurance Standards Board (AUASB) sets the auditing standards that govern how auditors must respond to these risks. Under ASA 540 Auditing Accounting Estimates and Related Disclosures, auditors must obtain sufficient appropriate audit evidence about whether accounting estimates — including impairment assessments, ECL calculations, and provisions — are reasonable in the context of the applicable financial reporting framework.

ASIC's enforcement powers include the ability to issue infringement notices for late lodgement of financial reports, apply to the court for orders requiring entities to restate financial reports, and commence civil penalty proceedings against directors and officers for breaches of financial reporting obligations. The regulator has demonstrated a clear intent to use these powers, particularly against large proprietary companies that fail to lodge financial reports on time.

Questions to Ask When Choosing an Auditor

Given ASIC's 2026-27 focus areas, Australian businesses should use these questions to assess whether a prospective auditor has the expertise and approach to address the specific risks in their financial reports.

• How do you approach the audit of impairment assessments, and what evidence do you require to support management's assumptions about cash flow projections and discount rates?
• What is your methodology for auditing revenue recognition under AASB 15, particularly for complex or multi-element arrangements?
• How do you assess the adequacy of our ECL model, and what forward-looking data do you expect us to incorporate?
• Are you familiar with the new guidance in Illustrative Example D of AASB 137, and how will you apply it to our decommissioning provisions?
• How do you ensure your audit team has the technical accounting expertise to address ASIC's current focus areas?
• What is your approach to challenging management's judgements in areas of significant estimation uncertainty?
• Have you had any ASIC audit file reviews in recent years, and what were the outcomes?

How MyMoney® Can Help

Choosing an auditor who understands ASIC's current focus areas — and has the technical expertise to audit complex accounting estimates — is one of the most important governance decisions an Australian business can make. The wrong auditor can leave your financial reports exposed to ASIC scrutiny, restatement risk, and reputational damage.

MyMoney® connects Australian businesses with qualified auditors who are registered company auditors (RCAs) with demonstrated expertise in the accounting standards and audit methodologies that matter most in 2026-27. Whether you need a statutory audit, an SMSF audit, or specialist assurance services, our marketplace helps you find the right professional.

Post a Brief to describe your audit requirements and receive proposals from vetted auditors. Or Browse Auditors on the MyMoney® Marketplace to find a registered company auditor with the expertise your business needs.