Collection House Limited has derecognised a deferred tax asset of $51.2 million, of which $44 million related to unused tax losses in its half-year financial report for the period ended 31 December 2021, following ASIC’s review of Collection House’s financial report for the year ended 30 June 2021.
As part of its financial reporting surveillance program, ASIC raised concerns about the recognition of the deferred tax asset and the adequacy of the related disclosures, including concerns about:
- the strength of Collection House’s evidence supporting assumptions about future profitability; and
- whether existing uncertainties caused by COVID-19 and other negative factors were given adequate consideration as part of its probability assessment.
Collection House subsequently reviewed the continuing impacts of COVID-19 on its business, which affected its assessment about the probability of future taxable profits, and made the adjustment.
ASIC previously emphasised the continuing impact of COVID-19 on 31 December 2021 financial reports and the need for directors and preparers of financial reports to consider uncertainties about future economic and market conditions when developing assumptions to support asset values.
ASIC’s financial reporting surveillance program aims to improve the quality of financial reporting and to ensure financial reports have been prepared in accordance with the law. This supports investor confidence and the integrity of Australia’s capital markets.
ASIC conducts regular reviews on a risk-basis of the financial reports of selected listed companies and other significant public interest entities to monitor compliance with the Corporations Act and Australian Accounting Standards. ASIC alerts the market prior to each reporting season about current topics or issues that will be the focus of the reviews.