IDP Education Limited (IDP) has adjusted its disclosure of a contingent liability in its financial report for the half-year ended 31 December 2022, following ASIC’s review of its financial report for the year ended 30 June 2022.
IDP’s estimate of the contingent liability, which relates to Goods and Services Tax (GST) matters in dispute with various Indian state tax authorities, is now $35 million, up from $23 million at 30 June 2022.
ASIC raised concerns that IDP’s estimate at 30 June 2022 was insufficient, because it included amounts only where a formal review by the state tax authorities had commenced, or where a refund claim for GST already paid had been disputed.
ASIC was concerned that IDP’s total contingent liability did not include additional unpaid GST amounts (and potential interest and penalties) on the basis that these had not been subject to a review by the tax authorities.
Entities involved in more complex and prolonged matters (such as legal disputes) should continually assess their total possible exposures for accuracy and completeness. ASIC reminds preparers of financial reports about the importance of contingent liability disclosures, as investors and other users rely on these to evaluate the total financial impact of an entity’s possible obligations.
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, supporting 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 2001 and accounting standards.
Accounting standard AASB 137 Provisions, Contingent Liabilities and Contingent Assets sets out the requirements for disclosing contingent liabilities.