Financial Reporting and Audit: ASIC's focus for FY26

ASIC has released its financial reporting and audit focus areas for the 2025–26 financial year, providing guidance to preparers, auditors, and directors about the regulator’s expectations in a rapidly evolving financial landscape.[1] This year’s priorities maintain continuity in core financial reporting areas while also emphasising sustainability and governance.

This article examines the areas under ASIC’s spotlight for the 2026 financial year. The introduction of new reporting obligations, as well as the completion of ASIC’s grace period for others, has created a regulatory environment under heightened scrutiny. Advisors and company officers should consider ASIC’s publication a warning on incomplete reporting.

Financial Reports

ASIC has signalled that it will closely focus on judgments made by accountants and preparers of financial reports in the upcoming financial year. ASIC has warned that accountants should be aware that ASIC will assess whether sufficient and appropriate audit evidence supports conclusions reached in financial reports.

In particular, ASIC is focusing on the following three areas:

• Revenue Recognition: Revenue must be recognised in accordance with the actual economic activity taking place. This may be relevant in industries such as construction, software and telecommunications, where revenue arrangements are often complex, multi-faceted, and stretched over time. For example, revenue generated from a 12-month contract should not be recognised upfront, as this does not reflect the substance of the transaction.
• Asset Valuation and Impairment: ASIC expects entities to use current data and reliable methods to estimate the value of their assets in financial reporting. This includes recognising impairment losses when assets are carried at more than their recoverable amount. This may be particularly relevant in industries such as retail and real estate, which often hold large physical assets that can lose value quickly if market conditions change.
• Provisions and Contingent Liabilities: ASIC is examining the adequacy of money set aside by companies to cover known liabilities where the amount or timing is uncertain. These may include costs arising from onerous contracts, leased property, financial guarantees given, and restructuring.

For professionals, this is a call to take extra care when making such judgments – or advising clients making those judgments - in preparing financial reports. For further information, you may refer to ASIC’s Financial Reporting and Audit Focus Areas.

Registrable Superannuation Entities

ASIC has expanded its oversight by including registrable superannuation entities (RSEs) in its review program. RSEs include regulated superannuation funds, approved deposit funds or pooled superannuation trusts, but exclude self-managed superannuation funds.

Since 2024, RSEs have been required to lodge audited financial reports. ASIC now reviews both the reports and the related audit files concerning RSEs.

Key focus areas include:

• Valuation of Unlisted Investments: ASIC expects detailed disclosures and robust audit evidence, due to the subjective nature of these valuations.
• Expense Allocation and Transparency: ASIC requires clear and justified disclosures of marketing and promotional expenses.

Accountants and auditors working with RSEs should anticipate heightened expectations around governance, documentation, and disclosure.

Grandfathered Entities

ASIC is also monitoring compliance among entities that - as of 2022 - are no longer exempt from lodging financial reports, otherwise known as ‘Grandfathered Entities’. The majority of Grandfathered Entities are large proprietary companies that had previously avoided public scrutiny.

This is a reminder that regulatory obligations apply regardless of historical exemptions. Professionals advising these entities should ensure that reporting obligations are clearly understood and met to avoid enforcement action.

Sustainability Reports

ASIC’s focus on sustainability reporting represents the most forward-looking aspect of its 2025-26 agenda. As of 1 January 2025, Group 1 entities must comply with AASB S2 Climate-related Disclosures.

An entity is classified as a ‘Group 1 entity’ if it meets at least two of the following three thresholds:

• Revenue: Consolidated revenue is $500 million or more.

• Assets: Consolidated gross assets total $1 billion or more at the end of the financial year.

• Employees: The entity and its controlled entities have 500 or more employees at year-end.
   

Entities may also qualify as a Group 1 entity if they are registered under the National Greenhouse and Energy Reporting Act, or belong to a group that meets specific environmental reporting thresholds under that legislation. For further information, refer to ASIC’s Regulatory Guide 280.

Importantly, ASIC expects entities to begin preparing now, even if they are not in the first wave of mandatory reporters.

This shift marks a new era in corporate reporting. Sustainability disclosures will no longer be voluntary or peripheral—they will be subject to the same rigour as financial statements.

The Key Takeaway: Remain Vigilant

ASIC’s FY26 focus areas reflect a maturing regulatory environment that demands both technical excellence and strategic foresight. ASIC will continue to employ both targeted reviews and random sampling, so every entity should be prepared for heightened scrutiny concerning their reports and audit focuses.

For auditors, accountants, and directors, the message is clear: high-quality reporting and auditing are not just compliance exercises—they are essential to maintaining trust in Australia’s capital markets and avoiding enforcement action.

More Cleardocs information on related topics

You can read earlier ClearLaw articles on a range of related topics, such as:

• ASIC – Key Focus Areas for 2025 – Private Markets, Superannuation and Cyber Risks
• Mandatory Climate Reporting Laws – Be Prepared, the Significant Changes are Quickly Approaching
• How Successful Accounting Professionals Are Deepening Client Relationships
• Tax Agent Disclosure Obligations: What To Do When You Suspect Fraudulent Behaviour?
  
  

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[1] The ASIC announcement can be accessed on the ASIC website via the following link: ASIC announces financial reporting and audit focus areas for FY 2025-26