ASIC notes the decision by Mosaic Brands Limited (Mosaic Brands) to increase its lease make good provision to $8.3 million in its financial report for the year ended 27 June 2021.

As a lessee, Mosaic Brands can be obliged to restore a leased property to a certain condition at the end of the lease term.  ASIC had raised concerns on the adequacy of the lease make good provision of $5.6 million in Mosaic Brands’ financial report for the year ended 28 June 2020.

As outlined in ASIC media release 21-129MR ASIC highlights focus areas for 30 June 2021 financial reports under COVID-19 conditions, the adequacy of provisions to meet obligations is important in providing useful and meaningful information to investors and other users of financial reports.

Directors are primarily responsible for the quality of an entity’s financial report. This includes ensuring that management produces quality financial information on a timely basis. Companies must have appropriate processes, records and analysis to support information in the financial report. 

Companies should also apply appropriate experience and expertise, particularly in more difficult and complex areas of accounting policies and estimates.