ASIC has welcomed the $2.1 million reclassification of expenses by ASX-listed Minemakers Limited (Minemakers) in its financial report for the half-year ended 31 December 2014.

Following ASIC inquiries, Minemakers reclassified prior year impairment losses on an unlisted investment from a reserve to accumulated losses.

ASIC reviewed Minemakers financial report for the year ended 30 June 2014 as part of an ongoing financial reporting surveillance program.

ASIC inquired with Minemakers whether there was objective evidence of a significant decline in the fair value of the unlisted investment, classified as available-for-sale, below its cost that would have required cumulative losses on the investment to be charged to profit in the years ended 30 June 2011 and 30 June 2014, rather than as reductions in a reserve.

It is important that those involved in preparing and approving financial reports understand that impairment losses on available-for-sale equity investments must be taken to profit where there is objective evidence of impairment such as a significant or prolonged decline in fair value below cost.

Background

In November 2014 ASIC announced its areas of focus for 31 December 2014 financial reports, including the correct classification of expenses between profit and other comprehensive income.

Since July 2014 ASIC’s enquiries have resulted in a number of companies amending their financial information, including:

• Tribune Resources Limited restated comparative balances as a result of errors in its tax accounting to 30 June 2014 (refer: 15-063 MR)
• Greenearth Energy Limited made a $2.15 million impairment charge relating to its geothermal operations (refer: 15-061MR)
• Resolute Mining announced it would impair the Syama Mine by $310 million (refer: 15-045MR)
• Primary Health Care reduced goodwill by $426.2 million (refer: 15-028MR)
• GoConnect Limited announced a $4.3 million impairment charge (refer: 15-005MR)
• Cyclopharm Limited wrote off a $3.38 million intangible asset (refer: 14-218MR)
• Terramin Australia Limited announced a $3.8 million prior period write-off (refer: 14-215MR)
• iProperty Group Limited announced a $4.6 million impairment charge (refer: 14-202MR)